-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U3cYUPdODmJxeTdduLqg2VZrONlCkjnpx2khOjasQT2tXoPKlws0M8ntB3NcA2Qz lmGesvXoVNU3akwQWyl+cw== 0000878004-98-000006.txt : 19980401 0000878004-98-000006.hdr.sgml : 19980401 ACCESSION NUMBER: 0000878004-98-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHUGACH ELECTRIC ASSOCIATION INC CENTRAL INDEX KEY: 0000878004 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 920014224 STATE OF INCORPORATION: AK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 033-42125 FILM NUMBER: 98580288 BUSINESS ADDRESS: STREET 1: 5601 MINNESOTA DR STREET 2: PO BOX 196300 CITY: ANCHORAGE STATE: AK ZIP: 99518 BUSINESS PHONE: 9075637494 10-K 1 FORM 10-K FOR CHUGACH ELECTRIC ASSOCIATION, INC. FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No. 34-31327, eff. 10-21-92) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (x) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________________ to _______________________ Commission file Number 33-42125 Chugach Electric Association, Inc. (Exact name of registrant as specified in its charter) Alaska 92-0014224 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 5601 Minnesota Drive, Anchorage, Alaska 99518 Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (907) 563-7494 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Securities registered pursuant to Section 12(g) of the Act: (Title of class) (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. /x/ Yes / / No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. N/A State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. (See definition of affiliate in Rule 405, 17 CFR 230.405). N/A CHUGACH ELECTRIC ASSOCIATION, INC. 1997 Form 10-K Annual Report Table of Contents Page PART I Item 1 - Business 1 Item 2 - Properties 12 Item 3 - Legal Proceedings 16 Item 4 - Submission of Matters to a Vote of Security Holders 19 PART II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters 19 Item 6 - Selected Financial Data 19 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 8 - Financial Statements and Supplementary Data 34 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 57 PART III Item 10 - Directors and Executive Officers of the Registrant 57 Item 11 - Executive Compensation 59 Item 12 - Security Ownership of Certain Beneficial Owners and Management 62 Item 13 - Certain Relationships and Related Transactions 62 PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 62 SIGNATURES 72 PART I Item 1 - Business GENERAL Chugach Electric Association, Inc. (Chugach or Association) is the largest electric utility in Alaska. Chugach was organized as an Alaska not-for-profit electric cooperative in 1948 and is engaged in the generation, transmission and distribution of electricity to approximately 68,000 metered locations in the Anchorage and upper Kenai Peninsula areas. Through an interconnected regional electrical system, Chugach's power flows throughout Alaska's Railbelt, a 400-mile-long area stretching from the coastline of the southern Kenai Peninsula to the interior of the state, including Alaska's largest cities, Anchorage and Fairbanks. On a regular basis, through its direct service to retail customers and indirectly through its wholesale and economy energy sales, Chugach provides some or all of the electricity used by approximately two-thirds of Alaska's electric customers. In addition, on a periodic basis, Chugach provides electricity to the Anchorage-area customers of Municipal Light & Power (ML&P). Chugach also supplies much of the power requirements of three wholesale customers, Matanuska Electric Association (MEA), Homer Electric Association (Homer) and the City of Seward (Seward). Substantially all of Chugach's currently-owned generating capacity is fueled by natural gas, which Chugach purchases under long-term, relatively low-cost gas contracts. The remainder of Chugach's generating resources are hydroelectric facilities. The Chugach system includes 501.4 megawatts (MW) of installed generating capacity that is provided by 15 generating units, 11.7 MW of generating capacity from two hydroelectric units that are owned jointly with MEA and ML&P, 1,571 miles of distribution lines and 402 miles of transmission lines. During 1997, Chugach sold 2.27 billion kilowatt hours (kWh) of power. In general, cooperatives are business organizations that are owned by their members. Cooperatives are designed to give groups of individuals or entities the opportunity to serve their own needs in a particular area of business activity and to solve their own problems in that area more effectively than when acting independently. In addition, as not-for-profit organizations, cooperatives are intended to provide services to their members at the lowest possible cost, in part by eliminating the need to produce profits or a return on equity. Today, cooperatives operate throughout the United States in such diverse areas as utilities, agriculture, irrigation, insurance and credit. All cooperatives are based upon similar principles and legal foundations. Since members' equity is not considered an investment, a cooperative's objectives and policies are oriented to serving member interests, rather than maximizing return on investment. Chugach's members are the consumers of the electricity sold by Chugach. As of December 31, 1997, Chugach had approximately 55,000 retail members receiving service at approximately 68,000 metered locations. The business and affairs of Chugach are managed by the General Manager and are overseen by its seven-member Board of Directors. Directors are elected at 1 large by the membership and serve three-year staggered terms. Each member is entitled to one vote. In addition to voting for directors, members have voting rights with respect to the sale, lease, or other disposition, except by mortgage or deed of trust, of all or a substantial portion of Chugach's property. Chugach customers are billed per a tariff rate, on a monthly basis for electrical energy consumed during the preceding month. Billing rates are approved by the Alaska Public Utilities Commission (APUC). Such rates have been adjusted quarterly or semi-annually pursuant to a simplified rate filing procedure (see Rate Regulation and Rates). Rates (derived from the historic cost of service basis) may generate revenues in excess of current period costs (net operating margins and nonoperating margins) in any year and are designated on Chugach's Statements of Revenues, Expenses and Patronage Capital as "assignable margins." Retained assignable margins are designated on Chugach's balance sheet as "patronage capital" that is assigned to each member on the basis of patronage. In furtherance of Chugach's operations as a cooperative, Chugach credits to its members, or patrons, all amounts received from the patrons for the furnishing of electricity in excess of Chugach's operating costs, expenses and provision for reasonable reserves. Such excess amounts (i.e., assignable margins) are considered capital furnished by the patrons, and are credited to their accounts and held by Chugach until such future time as they are retired and returned without interest. Chugach's Bylaws provide that such capital credits are to be retired (i) upon Chugach's dissolution or liquidation after payment of all of Chugach's outstanding indebtedness or (ii) at any earlier time if the Board of Directors determines that Chugach's financial condition will not be thereby impaired. At December 31, 1997, Chugach has a policy of retiring patronage capital on a general 20-year cycle for retail customers (i.e., patronage capital provided by the retail customer in 1975 is retired in 1995). In recent years, this rotation has been accelerated to a 14-year rotation cycle. In 1997, the Board of Directors approved a retirement of retail capital credits whereby the remaining retail margins earned in 1983 were returned to retail customers. Wholesale capital credits have been retired on a 10-year cycle pursuant to the Equity Management Plan Settlement Agreement despite its expiration in 1995. A new Settlement Agreement (different than the aforementioned agreement) has been negotiated with Alaska Electric Generation & Transmission Cooperative, Inc., (AEG&T)/MEA/Homer and has been approved by the APUC. Under this agreement, wholesale capital credits will continue to be rotated on a 10-year cycle until 1998. After 1998, wholesale capital credits are expected to be rotated using the retail schedule in place at that time. In 1997, The Board of Directors authorized retirement of 1987 wholesale capital credits in the amount of $1,205,510. A special wholesale capital credit retirement of $88,818 (wholesale margins from 1985) was also authorized in 1997. Approval of actual capital credit retirements is at the discretion of the Association's Board of Directors. As an electric cooperative, Chugach is exempt from federal income taxation under Section 501(c)(12) of the Internal Revenue Code (Code). Alaska electric cooperatives must pay to the State of Alaska, in lieu of state and local ad valorem, income and excise taxes, a tax at the rate 2 of $0.0005 per kWh of electricity sold in the retail market during the preceding year. In addition, Chugach collects a regulatory cost charge of $.000297 per kWh of retail electricity sold. This charge is assessed to fund the operations of the APUC. It is a pass-through and thus does not impact Chugach margins. Beginning January 1, 1998, the regulatory cost charge was reduced to $.000280 per kWh of retail electricity sold. Chugach's workforce consists of approximately 356 full-time employees. Approximately two-thirds of Chugach's employees are members of the International Brotherhood of Electrical Workers (IBEW). Chugach has three collective bargaining agreements with the IBEW that are currently open for negotiation. Although each of the contracts has an expiration date of January 31, 1998, the parties have agreed that the contracts shall continue in effect until new contracts are put in place. If the parties cannot agree on the terms of new agreements, all outstanding issues will be decided through interest arbitration. The Union cannot strike and Chugach cannot lockout under the continuing agreement. Characteristics of the Service Areas of Chugach and its Largest Customers As indicated in the foregoing, the service areas of Chugach and its wholesale and economy energy customers are often described collectively as the Railbelt Region of Alaska because the three geographic regions, from Fairbanks in central Alaska, through Anchorage, and south to the Kenai Peninsula (Seward), are linked by the Alaska Railroad. Anchorage is the trade, service and financial center for most of Alaska and serves as a major center for many state governmental functions. Other significant contributing factors to the Anchorage economy include a large federal government and military presence, tourism, air and rail transportation facilities and headquarters support for the petroleum, mining and other basic industries located elsewhere in the state. The Matanuska-Susitna Borough is immediately northeast of Anchorage, centered around the communities of Palmer and Wasilla. Although agriculture, tourism, mining and forestry are factors in the economy of the Matanuska-Susitna Borough, the economic well-being of the area is closely tied to that of Anchorage. The Kenai Peninsula is south of Anchorage with an economy substantially independent of the Anchorage area. The most significant basic industry on the Kenai Peninsula is the production and processing of petroleum products from the Cook Inlet region. Other important basic industries include tourism and fish harvesting and processing. Principal communities on the Kenai Peninsula are Homer, Seward, Kenai and Soldotna. Fairbanks is the center of economic activity for the central part of the state. Fairbanks (250 air miles north of Anchorage and about 400 air miles south of Alaska's northern border) is Alaska's second largest city. Basic economic activities in the Fairbanks region include federal and state government and military operations, the University of Alaska, tourism and support of natural resource development in the interior and northern parts of the state. Recently a 3 major gold mine has commenced operation near Fairbanks. The Trans-Alaska Pipeline System (crude oil) passes near Fairbanks on its route from Prudhoe Bay to Valdez. Competition Consistent with developments in other states, Alaska is contemplating the effects of retail competition in the sale of electric power. Chugach considers that the primary market in which competition will develop is the interconnected electrical system which stretches from the Kenai Peninsula to Fairbanks. Participants in this market consist of rural electric cooperatives and municipally-owned utilities as well as cogeneration providers and load aggregators. Chugach anticipates that principal methods of competition will emphasize price, service and range of service offerings. Chugach has been very active in the effort to promote customer choice in the retail market in Anchorage because it believes it will benefit customers and will put Chugach in a better competitive position as customer choice develops. After several retail customers in a neighboring utility's service area formally asked Chugach to provide their electric power, Chugach requested access over the other utility's distribution and transmission system and asked the APUC to enforce the request. At this time, the APUC has not ruled on this request and it is not possible to predict their decision. Chugach has also been active at the State legislative level in support of the customer's right to choose their electric power supplier. Virtually all Alaskan utilities have opposed Chugach's efforts to develop competition and are active in attempting to create exclusive service territories. At this time, however, no bill relating to customer choice has moved out of committee. Thus, it is not possible to predict the outcome of this legislative process. Several Chugach customers are investigating self-generation or cogeneration using various technologies, including fuel cells, and may choose to generate their own power. It is not possible to predict the impact this type of project will have on Chugach's revenues. At least one electric power load aggregator is active in the Anchorage market. The outcome of Chugach's efforts to open access over the neighboring utility's system will impact the success and number of load aggregators operating on the interconnected system. At this time, it is not possible to predict the impact that load aggregators will have on Chugach's revenue. To meet these competitive challenges, Chugach has formed a Marketing Department, continues to operate its Key Account program for larger customers and continues to develop new services to enhance existing customer's satisfaction. Rate Regulation and Rates Chugach is subject to rate regulation by the APUC. In January 1987, the APUC adopted a simplified rate filing (SRF) procedure for use solely by electric cooperatives. Under the SRF 4 procedure, electric cooperatives may submit proposed base demand and energy rate changes to the APUC for approval (either on a quarterly or semi-annual basis) without the necessity of undergoing a formal hearing process. The proposed rates must be approved by the Board of Directors of the electric cooperative before they will be accepted by the APUC for consideration. Chugach has been a participant in this process since 1989. In August 1996, the Chugach Board of Directors approved a petition to the APUC to withdraw from the SRF process. The petition was submitted as part of Docket U-96-37, that was opened to resolve rate disputes with Chugach's wholesale customers. Interim-refundable rates for wholesale customers were ordered pending resolution of the docket. In February 1997, the APUC approved a Settlement Agreement between Chugach and AEG&T/MEA/Homer that resolved issues in the docket and established permanent rates. As part of the Settlement Agreement, the wholesale customers agreed not to oppose Chugach's withdrawal from SRF. The APUC orders have not addressed Chugach's withdrawal from SRF but Chugach anticipates approval of its petition. As part of the Order, the Association was required to file Cost of Service and Revenue Requirement Studies. Chugach filed these studies in March 1997. If Chugach's petition to withdraw from the SRF process is approved, future demand and energy rate changes will be sought through general rate case and other normal APUC procedures. While the formal ratemaking process typically takes nine months to one year, it is within the APUC's authority to authorize, after a notice period, rate changes on an interim-refundable basis. In addition, the APUC has been willing to open limited dockets to resolve specific issues from which expeditious decisions can often be generated. For 1997, Chugach management and its Board of Directors committed that retail and wholesale base rates would remain unchanged. As part of the Settlement Agreement with AEG&T/MEA/Homer, Chugach has committed that demand and energy rate levels to be established on a 1995 test year in Docket U-96-37 will remain at no higher than those levels through 1999 and may be reduced if existing rates provide returns higher than specified in the agreement. The Association will continue to recover changes in its fuel and purchased power expense levels through routine fuel surcharge filings with the APUC. See the Fuel Surcharge section of Management's Discussion and Analysis of Financial Condition and Results of Operations. The Indenture of Trust, Series A, First Mortgage bonds (Indenture) dated September 15, 1991 requires Chugach to set rates designed to yield margins for interest (a TIER-like statistic) equal to at least 1.20 times total interest expense. The authorized rate-setting TIER level of 1.35 has allowed Chugach to achieve greater than the 1.20 margins for interest. In 1997, Chugach's achieved TIER was 1.30. 5 Sales to Customers The following table shows the energy sales to and electric revenues from Chugach's retail, wholesale, and economy energy customers for the year ended December 31, 1997: Energy Loads and Revenues by Class of Customer Percent of Total MWh 1997 Revenues 1997 Revenues --- ------------- -------------- Direct retail sales: Residential 484,679 $ 48,718,433 34.0% Commercial 540,572 42,020,343 29.2 --------- ----------- ------ Total 1,025,250 90,738,776 63.2 --------- ----------- ------ Wholesale sales: MEA 490,670 24,793,315 17.3 Homer 416,980 17,851,001 12.4 Seward 53,593 2,362,915 1.6 --------- ----------- ------ Total 961,243 45,007,231 31.3 --------- ----------- ------ Economy Energy Sales: GVEA 282,805 7,930,126 5.5 Other 155 4,650 0.0 --------- ----------- ------ 282,960 7,934,776 5.5 --------- ----------- ------ Total sales to customers 2,269,453 $ 143,680,783 100.00% --------- ----------- ------ Retail Customers Service Territory. Chugach's retail service area covers the populated areas of Anchorage as well as remote mountain areas and villages. The service area ranges from the northern Kenai Peninsula on the South, to Tyonek on the West, to Whittier on the East and to Fort Richardson on the North. Customers. Chugach directly serves approximately 68,000 meters. There are approximately 55,000 members of Chugach. Some members are served by more than one meter, like, for example, service to high density multiple family dwellings. In many ways, Chugach's retail customer base does not conform to the traditional rural electric cooperative customer base in that Chugach's customers are primarily urban and suburban rather than rural. The urban nature of Chugach's customer base means that Chugach has a higher customer density per line mile than is typical for rural electric cooperatives. Higher customer density means that fixed costs can be spread over a greater number of customers. As a result of lower average costs attributable to each customer, Chugach may benefit from a greater level of stability in revenue, as compared to a less dense distribution system in which each individual customer would have a more significant impact on operating results. For the past five years no retail customer accounted for more than 5% of Chugach's revenues. 6 Wholesale Customers Chugach is the principal supplier of power under wholesale power contracts with MEA, Seward and Homer. Chugach's wholesale power contracts represented $45.0 million in revenues and 42.4% of Chugach's total MWh sales to customers in 1997. MEA and Homer. Chugach's contract with AEG&T (a generation and transmission cooperative of which MEA and Homer are the only full members; ML&P is an associate member) for the benefit of MEA obligates MEA to purchase all of its electric power requirements from Chugach. Contractually, MEA has the right, subject to APUC approval, to convert to a net requirements purchaser of power from Chugach, under which MEA would be obligated to buy its needed power from Chugach, net of its power needs satisfied from any of its own or AEG&T's resources (including from the 39 MW Soldotna 1 gas-fired generating station owned by AEG&T). After conversion to net requirements under the contract, MEA cannot reduce the amount of power it purchases from Chugach below a certain minimum amount. MEA also has the right, on seven years advance notice and subject to APUC approval, to convert to a take-or-pay purchaser of a fixed amount of power. If MEA converts to net requirements service, MEA will be required to pay demand charges based upon the highest post-1985 historical coincident peak on the MEA system. Therefore, Chugach will continue to recover fixed costs if MEA converts to net-requirements service. Also, Chugach's revenues from energy sales to MEA would decline in proportion to the reduction in the energy sold, but this decline would be largely offset by savings in the variable costs associated with energy production. The MEA contract is in effect through December 31, 2014. This contract does not protect against loss of load resulting from retail competition in MEA's distribution service territory. It is not possible at this time to estimate the potential impact on Chugach's revenues resulting from such competition. Chugach's contract with AEG&T for the benefit of Homer obligates Homer to take-or-pay for 73 MW of capacity (demand), and not less than 350,000 MWh (energy) per year. The Homer contract includes certain limitations on the costs that may be included in the rates charged to Homer by Chugach. The Homer contract expires on January 1, 2014. Homer's remaining resource requirements are provided by AEG&T's Soldotna unit and AEG&T shares attributable to Homer from the Bradley Lake hydroelectric project. Chugach and AEG&T have signed a dispatch agreement whereby Chugach has access to all of the Soldotna unit output except that which is required to supply Homer's load in excess of 73 MW. The term is for 40,000 operating hours or 10 years, whichever is first, although the term will be extended by three years if Chugach makes significant use of the unit during the last three years of the original contract term. AEG&T receives payment for variable operating and maintenance costs plus a margin for energy produced by the unit. Chugach obtained use of the unit output while AEG&T retained ownership costs and responsibility. In 1997, Chugach used 163,000 MWh from the Soldotna unit. Seward. Chugach currently provides all the firm power needs of Seward. A new contract with Seward, with an interruptible provision, is awaiting approval by the APUC. In 1997, sales to Seward amounted to 2.4% of Chugach's MWh sales to customers. 7 Economy Customers Golden Valley Electric Association. Under the terms of Chugach's agreement with Golden Valley Electric Association (GVEA), GVEA is obligated, under certain circumstances, to purchase, if available from Chugach, its non-firm energy needs until 2008. Sales under this agreement accounted for 12.5% of Chugach's 1997 MWh sales. Chugach and GVEA have entered into a tentative pooling agreement whereby the resources of both utilities would be dispatched on a common basis to reduce constraints on when non-firm energy would be available to GVEA. Construction of a coal-fired generation facility at Healy (Healy II) is underway with 50% of the construction costs funded from a United States Department of Energy grant under the Clean Coal Technology III Demonstration Program. This facility is projected to be operational in mid-1998 and is expected to produce up to 50 MW of coal-fired power. When Healy II becomes operational, GVEA will reduce its purchases of non-firm energy from Chugach by taking firm power from Healy II. Chugach's management does not believe that such a reduction will have a material adverse effect on Chugach. The Ft. Knox gold mine, near Fairbanks, with an anticipated load of 30-35 MW began operation during the last quarter of 1996. FUEL SUPPLY In 1997, 90% of Chugach's power was generated from gas, and 89% of that gas-fired generation took place at Beluga. Chugach's three sources of natural gas are (1) the Beluga River Field producers [ARCO Alaska, Inc. (ARCO), Municipal Light & Power (ML&P) (old Shell) and Chevron USA Inc. (Chevron)], (2) Marathon Oil Company (Marathon) and (3) ENSTAR Natural Gas Company (ENSTAR). ARCO, ML&P and Chevron each own one-third of the gas produced from the Beluga River Field and in 1997 provided approximately equal shares of the Beluga gas. Chugach has approximately 447 billion cubic feet (BCF) of gas committed to it from the Beluga River Field producers and Marathon. Chugach currently uses about 20 BCF of natural gas per year for firm service. Chugach believes that this usage will remain fairly constant and estimates that its current contract gas will last 16 to 20 years. In 1996, Shell sold its interests in the Beluga River Field to ML&P and ML&P assumed Shell's contractual obligations to sell natural gas to Chugach. Chugach believes that this transfer will have no material effect on the delivery of Beluga gas to Chugach. The delivered price for Chugach's fuel supply is lower than that available to other generators in the interconnected Railbelt. ML&P burns natural gas purchased from the Beluga River Field producers and transported by ENSTAR. Chugach has a transportation contract with ENSTAR to transport Chugach gas purchased from Marathon or the Beluga River Producers to the Soldotna (AEG&T) and/or International Power plants (International). The rate for firm transportation is $0.63 per MCF and the rate for interruptible transportation is $0.30 per MCF. There is a minimum monthly bill of $2,600. The primary reasons that Chugach's fuel supply has a lower delivered price than that available to other generators are (i) Chugach purchases 8 its gas directly from producers rather than from gas utilities and (ii) Chugach's power plants are located in close proximity to gas fields so that there are insignificant transportation costs included in the price of the fuel. ML&P currently depends on ENSTAR to transport all of the gas it uses. The ENSTAR tariff rate is $105,000 per month plus $0.28 per MCF. GVEA uses both coal-fired and oil-fired generators. Because of the high cost of fuel oil, GVEA is normally an importer of lower cost power from the south. Beluga River Field Producers Chugach has similar requirements contracts with each of ARCO, ML&P (old Shell) and Chevron that were executed in April 1989, superseding contracts that had been in place since 1973. Each of the contracts with the Beluga River Field producers provides for delivery of gas on different terms in three different periods. Period 1 related to the delivery of gas previously committed by the respective producer under the 1973 contracts terminated in June 1996. The maximum deliverability under the Beluga and Marathon contracts is in excess of the peak winter demand requirements of the Beluga plant and allows for increased deliverability should Chugach's combined-cycle plant be out of service. During Period 2, which began in June 1996 and continues until the earlier of the delivery of 180 BCF of natural gas or December 31, 2013, Chugach is entitled to take delivery of up to 180 BCF of natural gas (60 BCF per Beluga River Field producer). During this period, Chugach is required to take 60% of its total fuel requirements at Beluga from the three Beluga River Field producers, exclusive of gas purchased at Beluga under the Marathon contract for use in making sales to GVEA or certain other wholesale purchasers. The price for gas during this period under the ARCO and ML&P (old Shell) contracts is approximately 88% (or $1.51 per MCF on December 31, 1997) of the price of gas under the Marathon contract (described below), plus taxes. The price during this period under the Chevron contract is approximately 110% (or $1.88 per MCF on December 31, 1997) of the price of gas under the Marathon contract (described below), plus taxes. During Period 3 under the Beluga River Field producers' contracts, which begins at the earlier of December 31, 2013 or the end of Period 2, Chugach may become entitled to take delivery of up to 120 BCF of natural gas (40 BCF per producer). Whether any gas will be taken in Period 3, and the price and take requirements with respect thereto, are to be determined in the future based upon then-current market conditions. Chugach also has supplemental, annually renewable contracts with the Beluga River Field producers to supply supplemental gas (for peak periods of energy usage) if they have it available in excess of the amounts guaranteed in the basic contracts. The supplemental gas contracts raise the daily deliverability of gas to an aggregate of 85,200 MCF per day from the Beluga River Field producers. The base price of the gas under these contracts is the same as the base price under the Marathon contract described below, plus taxes. 9 Marathon Chugach entered into a requirements contract with Marathon in September 1988 for an initial commitment of 215 BCF. The contract expires December 31, 2015 or, if earlier, the date on which Marathon has delivered to Chugach a volume of gas in total which equals or exceeds the total volume of gas that Marathon is required to sell and deliver to Chugach under the agreement. The base price for gas under the Marathon contract is $1.35 per MCF, adjusted quarterly to reflect the percentage change between the preceding twelve-month period and a base period in the average prices of West Texas Intermediate Crude Oil (a benchmark of the Light Sweet Crude Oil Futures Index), the Producer Price Index for natural gas, and the Consumer Price Index for heating fuel oil. The price on December 31, 1997, exclusive of taxes was $1.71 per MCF. Under the terms of the Marathon contract, Marathon generally provides the primary supply of gas required for sales to GVEA, all of Chugach's requirements at Bernice Lake and 40% of the requirements at Beluga. Marathon also has a right of first refusal to provide additional gas under any sales agreements that Chugach may enter into with electric utilities that Chugach does not currently serve. ENSTAR Natural Gas Company Chugach and ENSTAR signed a transportation agreement in December 1992 that was approved by the APUC in January 1993, whereby ENSTAR would transport Chugach's gas purchased from the Beluga producers or Marathon on a firm basis to both Chugach's International Power Plant and AEG&T's Soldotna Power Plant at a transportation rate of $0.63 per MCF. In addition, ENSTAR agreed to transport gas on an interruptible basis for off-system sales at a rate of $0.30 per MCF. The agreement contains a minimum monthly bill of $2,600 for firm service. Chugach holds a reservation to receive its gas requirements at International Power Plant from ENSTAR under a tariff approved by the APUC in the event that the transportation agreement is subsequently canceled. Under the currently suspended tariff, ENSTAR is obligated to supply all of the gas Chugach desires at a price approved by the APUC. There would be a monthly minimum bill of $10,465, but no requirement to actually use any gas at International. The current delivered price under the tariff is $2.53 per MCF. COMPLIANCE WITH ENVIRONMENTAL STANDARDS Chugach's operations are subject to certain Federal, State and local environmental laws which Chugach monitors to ensure compliance. The costs associated with environmental compliance are included as a component of both the operating and capital budget processes. Chugach accrues for costs associated with environmental remediation obligations when such costs are probable and reasonably estimable. 10 REFINANCINGS On September 19, 1991, Chugach issued $314,000,000 of First Mortgage Bonds, 1991 Series A, for purposes of repaying existing debt to the Federal Financing Bank (FFB) and the Rural Electrification Administration (REA), (now Rural Utilities Services (RUS)). Pursuant to Section 311 of the Rural Electrification Act, Chugach was permitted to prepay the REA debt at a discounted rate of approximately 9%, resulting in a discount of approximately $45,000,000. The gain on prepayment of the REA debt has been deferred and Chugach has obtained permission from the APUC to flow through the benefit to consumers through lower rates in the future. The original issuance consisted of bonds in the amount of $52,000,000 due in 2002 bearing interest at 8.08% (Series A 2002 Bonds) and bonds in the amount of $262,000,000 due in 2022 and bearing interest at 9.14% (Series A 2022 Bonds). Interest is payable semiannually on March 15 and September 15. The Series A 2002 Bonds are subject to annual sinking fund redemption at 100% of the principal amount thereof that commenced March 15, 1993. The Series A 2022 Bonds are subject to annual sinking fund redemption at 100% of the principal amount thereof commencing March 15, 2003. The Series A 2002 Bonds are not subject to optional redemption. The Series A 2022 Bonds are redeemable at the option of Chugach on any interest payment date at an initial redemption price of 109.14% of the principal amount thereof declining ratably to par on March 15, 2012. The Indenture prohibits outstanding short-term indebtedness (other than trade payables) in excess of 15% of Chugach's net utility plant and limits certain cash investments to specific securities. Chugach has reacquired $44,295,000 of the Series A 2022 bonds since December 1995 leaving a remaining balance of $217,705,000 at December 31, 1997. Chugach has negotiated a supplemental indenture (Third Supplemental Indenture of Trust) with CoBank which previously allowed up to $80 million in future bond financing. Recently Chugach finalized an amendment to the Third Supplemental Indenture of Trust (Seventh Supplemental Indenture of Trust) that eliminates the maximum aggregate amount of bonds the company may issue under the agreement. At December 31, 1997, Chugach had bonds in the amount of $71.4 million outstanding under this financing arrangement. The balance is comprised of a $1.4 million bond (CoBank 1) that carries an interest rate of 8.95% maturing in 2002, a $10 million bond (CoBank 2) priced at 7.76% due in 2005, a $21.5 million bond (CoBank 3), currently priced at 6.65% (repriced periodically), a $23.5 million bond (CoBank 4) currently priced at 6.65% (also repriced periodically), and a $15 million bond (CoBank 5) currently priced at 6.65% (also repriced periodically) due in 2002, 2007 and 2012. Principal payments on the CoBank 3 and 4 bonds commence in 2003 and continue through 2022. Additionally, Chugach has negotiated a similar supplemental indenture (Fifth Supplemental Indenture of Trust) with National Rural Utilities Cooperative Finance Corporation (NRUCFC) for $80 million. At December 31, 1997 there were no amounts outstanding under this financing arrangement. 11 Item 2 - Properties SYSTEM ASSETS General Chugach has 501.4 MW of installed capacity consisting of 15 generating units at four power plants. These include 365.6 MW of operating capacity at Beluga on the west side of Cook Inlet; 70.0 MW of power at Bernice Lake on the Kenai Peninsula; 48.6 MW of power at International Station in Anchorage; and 17.2 MW at Cooper Lake, which is also on the Kenai Peninsula. Chugach also has 11.7 MW of capacity from the two Eklutna hydroelectric plant generating units owned jointly with MEA and ML&P. In addition to its own generation, Chugach purchases power from the 90 MW Bradley Lake hydroelectric project owned by the Alaska Energy Authority (AEA) through Alaska Industrial Development and Export Authority (AIDEA). Bradley Lake is operated by Homer and dispatched by Chugach. The Beluga, Bernice Lake and International facilities are all fueled by natural gas. Chugach owns its offices and headquarters, located adjacent to its International Station in Anchorage, in fee simple. Warehouse space for some generation, transmission and distribution inventory (including a small amount of office space) is leased from an independent party not directly affiliated with Chugach. Generation Assets Chugach owns the land and improvements comprising its generating facilities at Beluga and International. It also owns all improvements comprising its generating plant at Bernice Lake, that is located on land originally leased from Chevron Oil Company now owned by Homer, and its generating plant at Cooper Lake, that is located on federal land pursuant to a major project license (Federal License) granted to Chugach by the Federal Power Commission in 1957. The Bernice Lake ground lease expires in 2011 and the Federal License for the Cooper Lake facility expires in 2007. The management of Chugach has no reason to believe that it will not be able to renew the Federal License or the Bernice Lake ground lease if desirable. In 1997, Chugach acquired a partial interest in the Eklutna Hydroelectric Project. The plant is located on federal land pursuant to a United States Bureau of Land Management (BLM) right-of-way grant issued October in 1997. 12 The following table lists specifics of the generating facilities of Chugach: Commercial Facility Type of Fuel Rated Capacity (1) Operation Date -------- ------------ ------------------ --------------- Beluga Power Plant: Unit 1 Natural Gas 15.7 1968 Unit 2 Natural Gas 15.7 1968 Unit 3 Natural Gas 64.7 1972 Unit 5 Natural Gas 66.5 1975 Unit 6 Natural Gas 74.0 1975 Unit 7 Natural Gas 74.0 1978 Unit 8 Steam (2) 55.0 1981 ----- 365.6 Bernice Lake Power Plant: Unit 2 Natural Gas 19.0 1968 Unit 3 Natural Gas 25.5 1978 Unit 4 Natural Gas 25.5 1981 ----- 70.0 International Generating Station: Unit 1 Natural Gas 15.0 1964 Unit 2 Natural Gas 15.1 1965 Unit 3 Natural Gas 18.5 1969 ----- 48.6 Cooper Lake Hydroelectric Plant: Unit 1 Hydroelectric 8.6 1960 Unit 2 Hydroelectric 8.6 1960 ----- Eklutna Hydroelectric 17.2 Plant (4): Unit 1 Hydroelectric 5.8 1955 Unit 2 Hydroelectric 5.9 1955 ---- 11.7 Total units 17 513.1 -- ----- (1) Capacity rating in MW at 30 degrees Fahrenheit. (2) Steam turbine-powered generator with heat provided by exhaust from natural-gas fueled Units 6 and 7 (combined-cycle). (3) Beluga Unit 4 and Bernice Lake Unit 1 were retired during 1994. (4) The Eklutna Hydroelectric Plant is jointly owned by Chugach, MEA and ML&P. The capacity shown is Chugach's 30% share of the plant's maximum output. 13 Transmission and Distribution Assets As of December 31, 1997, Chugach's transmission and distribution assets included 40 substations and 402 miles of transmission lines, 931 miles of overhead distribution lines and 640 miles of underground distribution line. Chugach owns the land on which 21 of its substations are located and a portion of the right-of-way connecting its Beluga plant to Anchorage. In the 1997 Eklutna acquisition, Chugach also acquired a partial interest in two substations and additional transmission facilities. Many substations and a substantial number of Chugach's transmission and distribution rights-of-way are the subject of federal or state permits and licenses. Under the Federal License and a permit from the United States Forest Service, Chugach operates its Quartz Creek transmission substation, substations at Hope, Summit Lake and Daves Creek, and transmission lines over all federal lands between Cooper Lake on the Kenai Peninsula and Anchorage. Long-term permits from the Alaska Division of Lands and the Alaska Railroad Corporation govern much of the rest of Chugach's transmission system outside the Anchorage area. Within the Anchorage area, Chugach operates its University Substation and several major transmission lines pursuant to long-term rights-of-way grants from the BLM, and transmission and distribution lines have been constructed across privately-owned lands pursuant to easements across public rights-of-way and waterways pursuant to authority granted by the appropriate governmental entity. Title Substantially all of the properties and assets of Chugach, including generation, transmission and distribution properties, but excluding all excepted property, are pledged to secure repayment of the Series A Bonds and all other bonds that may be issued under the Indenture. The Indenture defines excepted property to include, among other things, cash on hand, instruments and certain securities (other than those required to be deposited with the Trustee under the terms of the Indenture), patents and transportation equipment (including vehicles, vessels and barges), leases for an original term of less than five years, certain non-assignable permits, licenses and contractual rights, property located outside the State of Alaska and not used in connection with Chugach's generation, transmission and distribution system and other property in which a security interest cannot legally be perfected. The lien of the Indenture is subject to certain permitted encumbrances that the Indenture defines to include certain identified restrictions, exceptions, reservations, conditions and limitations existing on the date of the Indenture, reservations in U.S. patents, nondelinquent or contested tax liens, local easements, leases and reservations and liens for nondelinquent rent or wages. The lien of the Indenture is also subject to the lien in favor of the Trustee to recover amounts owing to the Trustee under the Indenture. In addition to the Indenture, many of Chugach's properties are burdened by easements, plat restrictions, mineral reservation, water rights and similar title exceptions common to the area or customarily reserved in conveyances from federal or state governmental entities, and to 14 additional minor title encumbrances and defects. In the opinion of Chugach's general counsel, none of these title defects will materially impair the use of its properties in the operation of its business. In addition, a lawsuit was filed against the State of Alaska in which the plaintiffs allege that the manner in which the State administered and disposed of certain lands violates the Alaska Mental Health Enabling Act. One of Chugach's substations and its right-of-way across State lands may be subject to the plaintiffs' claims. Chugach's management believes that such claims will not materially affect Chugach's financial position, results of operations or cash flows. Chugach operates its Bernice Lake facility on lands originally leased from Chevron Oil Company (fee interest now owned by Homer) pursuant to a lease that is scheduled to expire in 2011. Chugach also operates several terminal connection sites and a substation under long-term or renewable leases from the State of Alaska and private parties. In addition, as discussed above, a substantial number of Chugach's transmission and distribution rights-of-way, and several distribution substations, are the subject of federal or state permits and easements. Under the Alaska Cooperative Act, Chugach is given the power of eminent domain for the purpose and in the manner provided by Alaska condemnation laws for acquiring private property for public use. Other Assets Bradley Lake. Chugach is a participant in the Bradley Lake Hydroelectric Project (Bradley Lake), which is a 90 MW hydroelectric facility near Homer on the southern end of the Kenai Peninsula that was placed into service in September 1991. The project was financed and built by AEA through grants from the State of Alaska and the issuance of $166 million principal amount of revenue bonds supported by power sales agreements with six electric utilities that will share the output from the facility (Chugach, ML&P, Homer and MEA (through AEG&T), GVEA and Seward). Effective August 12, 1993, AEA became part of the Alaska Industrial Development and Export Authority (AIDEA). Chugach and the other participating utilities have entered into take-or-pay power sales agreements under which AEA has sold percentage shares of the project capacity and the utilities have agreed to pay a like percentage of annual costs of the project (including ownership, operation and maintenance costs, debt-service costs and amounts required to maintain established reserves). Under these take-or-pay power sales agreements, the purchasing utilities have agreed to pay all project costs from the date of commercial operation even if no energy is produced. Chugach has a 27.4 MW or 30.4% share in Bradley Lake, and takes Seward's and MEA's shares which it net bills to them, for a total of 45% of the project's capacity. 15 The length of the agreement is fifty years from the date of commercialization or when the revenue bond principal is repaid, whichever is the longer. Chugach believes that, under a worst-case scenario, it could be faced with annual expenditures of approximately $4.6 million as a result of its Bradley Lake take-or-pay obligations. Chugach believes that this expense would be recoverable through the fuel surcharge ratemaking process. The share of debt service for which the Association is responsible is approximately $47,000,000 plus interest. In December 1997, $59,485,000 of the Power Revenue Bonds, Third Series and $47,710,000 of the Power Revenue Bonds, Fourth Series were refinanced under a forward refunding arrangement. The true interest cost of the new bonds decreased to 5.611% for the Third Series bonds and 6.06% for the Fourth Series bonds from 7.295% and 7.235%, respectively. This refunding produced a net present value saving to the participating utilities of approximately $8,500,000. The Association's share of these savings will be approximately $1,600,000. Chugach also provides transmission and related services as a wheeling agent (one who dispatches and transmits power of third parties over its own system) for all of the participants in the project. Upon the default of a participant, and subject to certain other conditions, AEA is entitled to increase each participant's share of costs pro rata, to the extent necessary to compensate for the failure of another participant to pay its share, provided that no participant's percentage share is increased by more than 25%. Chugach and AEG&T have also negotiated a Bradley Lake Scheduling Agreement whereby Chugach schedules AEG&T/Homer's share of the Bradley Lake project for the benefit of the Chugach system. AEG&T continues to pay its Bradley Lake costs and receives credit for the Bradley Lake energy generated for Homer. Chugach pays a fixed annual fee of $112,000 to AEG&T for these scheduling rights. This agreement allows Chugach to improve the efficiency of its generating resources through better hydrothermal coordination. Eklutna. Chugach purchased a 30% undivided interest in the Eklutna Hydroelectric Project from the United States. MEA purchased a 17% undivided interest in the Eklutna Project. The power MEA purchases from Eklutna is pooled with Chugach's purchases and sold back to MEA to be used in meeting MEA's overall power requirements. ML&P purchased the remaining 53% undivided interest in the Eklutna Project. Transfer of ownership occurred on October 2, 1997 in accordance with the Transition Plan. Chugach believes that the cost of power from the Eklutna Project will be less than it would have been under continued Federal ownership. Item 3 - Legal Proceedings LITIGATION Standard Steel Salvage Yard Site A cost recovery action was filed in Federal District Court on December 27, 1991 by the United States against Chugach and six other Potentially Responsible Parties (PRPs) seeking 16 reimbursement of removal and response action costs (Past Response Costs) incurred by US EPA at the Standard Steel and Metals Salvage Yard Superfund Site in Anchorage, Alaska (Site). The six other PRPs named in the action are the Alaska Railroad, Westinghouse Electric Corporation, Sears, Roebuck and Co., Montgomery Ward & Co., J.C. Penney Company, Inc. and Bridgestone/Firestone, Inc. In December, 1996, Chugach, the other named PRPs and certain federal agency PRPs (Federal PRPs) entered into a Partial Consent Decree. Under the Partial Consent Decree, Chugach and the other parties settled claims for Past Response Costs as well as investigation and other costs incurred with respect to the Site through December 1996. The Partial Consent Decree, however, did not settle Chugach's liability for future costs of designing and performing the cleanup at the Site (Future Costs). Although the Partial Consent Decree did not settle Chugach's or the other private PRPs' liability for Future Costs, the Partial Consent Decree binds the Federal PRPs and the Alaska Railroad to pay an aggregate share of 64% of Future Costs. Chugach and the five other private PRPs have reached a separate settlement to divide the remaining 36% of Future Costs among themselves. Under that settlement, Chugach's percentage share of liability for Future Costs will equal 14.89%. The private PRPs' agreement to perform remedial design and remedial action (RD/RA) at the Site is memorialized in a new Consent Decree (RD/RA Decree) that was entered by the Federal District Court in January 1998. The RD/RA Decree contains the scope of work for the RD/RA as well as settlement terms, including EPA's covenant not to sue Chugach and the other private PRPs for Future Costs once the RD/RA is completed. The estimate of Future Costs of RD/RA at the Site, as determined by Chugach's consultants based on cost estimates contained in the FS report, ranges from $5,231,200 to $6,619,800. The RD/RA Decree contains a cost estimate, as determined by EPA and including a 50% cost overrun contingency, of $8,400,000. Chugach's share of these estimated RD/RA expenses would range from approximately $778,926 to $1,250,760. Based on recent bid documents for the remedial action, it seems unlikely that the RD/RA will cost as much as EPA's high-end estimate. These amounts are only estimates, however, and cannot be definitively known until the RD/RA work at the Site is completed in late 1998 or 1999. Under the RD/RA Decree, Chugach and the other PRPs are required to reimburse the United States for EPA oversight costs and DOJ enforcement costs relating to the RD/RA. Those costs have been estimated by the United States to equal approximately $676,000. Chugach's share of these estimated oversight and enforcement costs would equal $100,656. In addition, one of the private PRPs, Montgomery Ward, recently filed for bankruptcy protection and did not execute the RD/RA Consent Decree. As a result, Chugach will be paying an additional sum equal to Chugach's percentage share of Montgomery Ward's share of Future Costs. This additional sum is estimated to be approximately $12,600 given current estimates of Future Costs, EPA oversight costs and DOJ enforcement costs. Based on the above estimates, the total amount that may be owed by Chugach under the RD/RA Decree ranges from approximately $892,182 to $1,364,016. These amounts, particularly the projected EPA oversight costs, are only estimates and are subject to change, 17 although, in light of recent bid documents, Chugach does not anticipate that the costs will reach the high-end estimate. In addition, the RD/RA Decree contains reservation of rights allowing EPA to seek further response actions and payments from the PRPs under certain circumstances, including for costs associated with alleged natural resource damages and no prediction can be made whether EPA will request activities through its reservation of rights under the RD/RA Decree. Four of Chugach's insurance carriers have been paying, under a reservation of rights, Chugach's costs of defense for the Site. The carriers reserved their rights regarding indemnification of Chugach for response costs. In February 1998, Chugach reached an agreement in principle with these four insurance carriers pursuant to which the carriers will pay the majority of Chugach's costs relating to the Site, including all Past Costs and Future Costs. This settlement preserves Chugach's potential claim for natural resource damages and is anticipated to result in Chugach paying no more that $500,000 for all Site costs. Management believes that the latter amount would be fully recoverable in rates and therefore would have no impact on Chugach's financial condition or results of operations. 18 Item 4 - Submission of Matters to a Vote of Security Holders Not Applicable PART II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters Not Applicable Item 6 - Selected Financial Data The following tables present selected historical information relating to financial condition and results of operations over the past five years: Balance Sheet Data ....... 1997 1996 1995 1994 1993 ------------ ------------ ------------ ------------- ------------ Plant net: In service ............ $393,228,853 $400,052,837 $391,200,269 $ 390,969,561 $382,804,772 Construction work in progress ............ 24,664,395 19,826,957 27,068,964 22,795,657 27,698,289 ------------ ------------ ------------ ------------- ------------ Electric plant, net 417,893,248 419,879,794 418,269,233 413,765,218 410,503,061 Other assets .......... 67,674,051 62,608,636 66,521,090 65,559,620 65,816,373 ------------ ------------ ------------ ------------- ------------ Total assets ....... $485,567,299 $482,488,430 $484,790,323 $ 479,324,838 $476,319,434 ------------ ------------ ------------ ------------- ------------ Capitalization: Long-term debt ........ 312,006,501 307,905,847 305,641,703 303,675,870 308,869,343 Capital leases ........ -- -- -- 131,582 261,991 Equities and margins .. 109,119,697 104,477,942 99,230,550 94,579,059 84,089,720 ------------ ------------ ------------ ------------- ------------ Total capitalization $421,126,198 $412,383,789 $404,872,253 $ 398,386,511 $393,221,054 ------------ ------------ ------------ ------------- ------------ Summary Operations Data Operating revenues ....... 143,947,730 134,876,668 129,379,308 130,912,171 122,159,761 Operating expenses ....... 113,070,990 100,913,804 95,920,361 90,151,993 90,346,001 Interest expense ......... 26,661,510 27,052,186 27,207,648 27,508,928 27,544,280 Amortization of gain on refinancing ............ 1,577,149 1,703,136 2,150,476 1,926,212 1,948,394 ------------ ------------ ------------ ------------- ------------ Net operating margins 5,792,379 8,613,814 8,401,775 15,177,462 6,217,874 Nonoperating margins ..... 1,762,018 1,217,557 604,418 (249,028) 795,378 ------------ ------------ ------------ ------------- ------------ Assignable margins .. $ 7,554,397 $ 9,831,371 $ 9,006,193 $ 14,928,434 $ 7,013,252 ------------ ------------ ------------ ------------- ------------
19 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations The statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" that relate to future plans, events or performance, including statements relating to collection of fuel surcharges, natural gas prices and development of the competitive marketplace, are forward-looking statements which involve risk and uncertainties including, but not limited to, actions of the APUC, competitive pressures, factors that affect natural gas prices and other risks identified in the Chugach Securities and Exchange Commission filings. Actual results, events or performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Association undertakes no obligation to publicly release any revisions to these forward-looking statements that may be needed to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS Chugach operates on a not-for-profit basis and, accordingly, seeks only to generate revenues sufficient to pay operating and maintenance costs, the cost of purchased power, capital expenditures, depreciation and principal and interest on all indebtedness of Chugach and to provide for the establishment of reasonable margins and reserves. Revenues in excess of current period costs (net operating margins and nonoperating margins) in any year are designated on Chugach's Statements of Revenues, Expenses and Patronage Capital as assignable margins. Retained assignable margins are designated on Chugach's balance sheet as patronage capital, which is assigned to each member on the basis of patronage. This patronage capital constitutes the principal equity of Chugach. Revenues Operating revenues include sales of electric energy to retail, wholesale and economy energy customers and other miscellaneous revenues. In 1997, operating revenues were approximately 6.7% higher than 1996. This increase was largely attributable to higher sales to retail and two of the wholesale customer classes. Higher fuel costs also contributed to the increase since fuel and purchased power costs are passed directly to customers through a fuel and purchased power adjustment factor. See further discussion under Fuel Surcharge. Retail demand and energy rates did not change in 1997 while demand and energy rates charged to MEA decreased slightly. Demand and energy rates to Homer and Seward did not change. In 1996 operating revenues were approximately 4.2% higher than 1995. This increase was largely attributable to higher sales to all three customer classes. Demand and energy rate increases (on an interim-refundable basis) to both of the wholesale customer classes contributed to the rise in revenues. Retail demand and energy rates did not change in 1996. Higher fuel costs also contributed to the increase. Revenues and power sold were as follows for the years ended December 31: 20 Year MWh sold Operating revenues 1997 2,269,453 $143,947,730 1996 2,215,842 134,876,668 1995 2,136,599 129,379,308 Chugach makes economy sales primarily to GVEA. These sales commenced in 1988 and have contributed to Chugach's growth in operating revenues. Chugach does not take such economy sales into consideration in its long-range resource planning process because these sales are non-firm sales that depend on GVEA's need for additional power and Chugach's available generating capacity at the time. In 1997, economy sales to GVEA constituted approximately 5.5% of Chugach's sales revenues. The impact of inflation on Chugach's revenues falls into two rate categories as follows: Fuel Surcharge Fuel and purchased power costs are passed directly to Chugach's wholesale and retail customers through a fuel and purchased power adjustment factor (fuel surcharge). Changes in these costs due to inflation or other market conditions are passed directly to Chugach's retail and wholesale customers, which results in either a direct increase or decrease to Chugach's system revenues. The fuel adjustment factor is currently approved on a quarterly basis by the APUC. There are no limitations on surcharge rate changes. Increases in Chugach's fuel and purchased power costs result in increased revenues while decreases in costs result in lower revenues. Revenue from the fuel adjustment charge normally does not impact margins. In 1997, Chugach experienced higher than anticipated fuel and purchased power costs that were considered unusual and transitory in nature. In an effort to maintain overall price stability, Chugach requested and was granted a waiver by the APUC to leave fuel surcharge rates at the computed second quarter 1997 level through the fourth quarter 1997. Further, Chugach elected to forego collection of approximately $3,500,000 of fuel and purchased power costs (representing the cumulative uncollected fuel surcharge through May 1997). Routine quarterly adjustments have resumed and fuel surcharge rates increased effective January 1998. Undercollected fuel and purchased power costs for June through December 1997 will be recovered throughout 1998 under a plan approved by the APUC. In 1988, Chugach began making economy energy sales at a price that contemplated the future cost of the gas used to generate such energy. The APUC authorized Chugach to establish a fund whereby 80% of the margins earned from these sales would be used to mitigate the rate impact when natural gas prices increased in accordance with the fuel contracts which occurred in June 1996. 21 The margins in this fund, known as the rate stabilization fund, were returned to Chugach's ratepayers over a 12-month period in the form of a credit to the fuel adjustment factor. The process was completed in May 1997. Chugach suspended accruals to the submarine cable reserve in 1995 pursuant to an agreement with the wholesale customers. The balance of the reserve has been returned to ratepayers via a credit to the fuel adjustment factor over a period of 15 months, ending in March 1997. Simplified Rate Filing Since 1989 operating and maintenance costs and other nonfuel and purchased power costs have been recouped through a Simplified Rate Filing (SRF) process that enabled Chugach to raise its electric prices up to 8% over a cumulative twelve-month period or up to 20% over a cumulative thirty-six month period, subject to APUC approval. Chugach's annual rate changes, excluding fuel adjustments, for retail and wholesale classes for the years 1995 through 1997 were as follows: 1997 1996 1995 ---- ---- ---- Retail 0.00% 0.00% (4.92%) Wholesale: Homer 0.00% 5.32% (9.52%) MEA (0.80%) 2.46% (7.39%) Seward 0.00% 2.46% (7.37%) In August 1996, the Board of Directors approved a petition to the Alaska Public Utilities (APUC) to withdraw from the SRF process. This petition was submitted to the APUC as part of Docket U-96-37, which was opened to resolve rate disputes with Chugach's wholesale customers. Interim-refundable rates for wholesale customers were ordered pending resolution of the docket. In February 1997, the APUC approved a Settlement Agreement between Chugach and its wholesale customers resolving issues in the docket and establishing permanent rates. As part of the APUC order, the Association was required to file Cost of Service and Revenue Requirement Studies. These studies were filed in March 1997. As part of the Settlement Agreement, the wholesale customers agreed not to oppose Chugach's withdrawal from SRF. The APUC orders have not addressed Chugach's withdrawal from SRF but Chugach anticipates approval of its petition. Future rate changes will be applied for through general rate case and other normal APUC procedures. At December 31, 1997, Docket U-96-37 had not been closed. A provision for a wholesale rate refund of $980,389 was recorded at December 31, 1997 to accommodate certain rate adjustment clauses contained in the Settlement Agreement. 22 Expenses Chugach's operating expenses for the years ended December 31, 1997, 1996 and 1995 were as follows: Year Operating expenses 1997 $113,070,990 1996 100,913,804 1995 95,920,361 Operating expenses for 1997 were 12.0% higher than 1996. Operating expenses for 1996 were 5.2% higher than 1995. The reasons for the significant operating expense variances follow: Year ended December 31, 1997 compared to the year ended December 31, 1996 Production expense increased in 1997 over 1996. Higher fuel prices and higher fuel consumption (due to the increase in kWh sales) were the major causes of this increase. As previously reported, Chugach has completed the transition to Period 2 under the long-term fuel supply contracts and fuel costs now result from market-based prices (See Fuel Supply in Item 1). Purchased power expense increased in 1997 over 1996. This was substantially due to the system operating scenario throughout 1997 wherein Chugach purchased power from AEG&T's Soldotna 1 plant to ensure system reliability on the Kenai Peninsula. Consumer accounts expense decreased in 1997 from 1996. The majority of this decrease was due to a lower level of common information services costs being allocated to this function. Other interest expense decreased in 1997 from 1996. This was caused by a lower average outstanding balance on the short-term lines of credit throughout the year. Year ended December 31, 1996 compared to the year ended December 31, 1995 Chugach experienced a 17.5% increase in production costs in 1996 over 1995. This rise is due mostly to higher fuel prices and higher fuel consumption associated with the increase in kWh sales. As previously reported, Chugach had completed the transition into Period 2 under the long-term fuel supply contracts (see Fuel Supply in Item 1). Fuel costs result from market-based prices instead of the lower prices from Period 1 (old Beluga gas) as outlined in the contracts. Distribution expense decreased by 12.2% in 1996 from the same period in 1995. This 23 decrease was caused mostly by lower levels of line maintenance expense resulting from a decrease in distribution right-of-way clearing activities. The focus of these clearing activities was on distribution lines in 1995 and transmission lines in 1996. Depreciation expense again increased in 1996 over 1995. This was the combined result of a higher plant in service balance as well as the completion of a depreciation rate phase-in plan approved by the APUC. Transmission plant depreciation rates for submarine cables were implemented in 1994, while revised depreciation rates for the remainder of transmission, distribution and general plant were implemented in 1995. Implementation of the revised generation plant depreciation rates took place in January 1996. These rates were obtained from an original depreciation study that included plant asset account activity through December 31, 1990. The APUC required that Chugach file an update to the 1990 study. This update, for plant asset account balances as of December 31, 1994 was submitted to the APUC although Chugach did not request a change in depreciation rates. The study has again been updated for plant asset account balances at December 31, 1995. Chugach submitted the new depreciation rates from the latest update to the study to the APUC for implementation effective January 1, 1998. Other interest expense was higher during 1996 than in 1995. This was due to a higher average outstanding balance on the short-term lines of credit. The line of credit was used to fund the reacquisitions of some of Chugach's Series A, 2022 bonds during 1996. Several draws were subsequently converted to long-term bonds under the Third Supplemental Indenture (CoBank 3 and 4). Interest charged to construction decreased in 1996 due mostly to a lower construction work in progress balance during the period. Margins Chugach's assignable margins for the years ended December 31, 1997, 1996 and 1995 were as follows: Period Net operating margins Nonoperating margins Assignable margins 1997 $ 5,792,379 $ 1,762,018 $ 7,554,397 1996 $ 8,613,814 $ 1,217,557 $ 9,831,371 1995 $ 8,401,775 $ 604,418 $ 9,006,193 Nonoperating margins increased in 1997 over 1996. This increase was caused mostly by a gain recorded on the sale of a generator hot gas case that had been held in inventory. Nonoperating margins increased in 1996 over 1995 primarily because of the write-off of a failed submarine cable and other property in 1995. No similar events took place in 1996. Additionally, more capital credits were received in 1996 than 1995. This increase was due 24 mostly to the higher level of borrowing from CoBank (capital credits received are based on patronage). Patronage Capital (Equity) Chugach's patronage capital and total equity have shown steady growth, both in dollars and as a percentage of capitalization. The following table summarizes Chugach's patronage capital and total equity position since 1995: 1997 1996 1995 ------------ ------------ ----------- Patronage capital at beginning of year . $100,685,517 $ 95,421,358 $91,079,686 Retirement of capital credits and estate payments ............................ 3,439,822 4,567,212 4,664,521 Assignable margins ..................... 7,554,397 9,831,371 9,006,193 ------------ ------------ ----------- Patronage capital at end of year ....... 104,800,092 100,685,517 95,421,358 Other equity ........................... 4,319,605 3,792,425 3,809,192 ------------ ------------ ----------- Total equity ........... $109,119,697 $104,477,942 $99,230,550 ------------ ------------ -----------
The Indenture includes a covenant restricting the distribution of patronage capital to members. Chugach cannot distribute patronage capital to members if 1) an event of default exists or 2) the aggregate amount of patronage capital distribution exceeds the sum of $7,000,000 plus 35 percent of the aggregate assignable margins earned after December 31, 1990. Times Interest Earned Ratio (TIER) Alaska electric cooperatives generally set rates on the basis of TIER. TIER is determined by dividing the sum of assignable margins plus long-term interest expense (excluding capitalized interest) by long-term interest expense. Beginning in 1989, Chugach's Board of Directors approved an Equity Management Plan that established a schedule for building Chugach's equity. Since then Chugach has managed its business with a view toward achieving a TIER of 1.25 or greater. Chugach's achieved TIERs for the past five years were as follows: Period TIER 1997 1.30 1996 1.39 1995 1.34 1994 1.58 1993 1.27 25 The Indenture requires Chugach to establish rates reasonably expected to yield margins for interest (MFI) equal to at least 1.20 times total interest expense (I), where margins for interest are defined as net margins plus interest charges and accruals for federal income and other taxes imposed on income after deduction of interest charges for such period, provided that the amount of nonoperating margins included in assignable margins shall not exceed 50% of assignable margins. Chugach's achieved MFI/I for the past five years are not materially different from the TIER calculations shown above. The Indenture requires that Chugach achieve such a 1.20 ratio for any 12 consecutive month period of the last 18 months before issuing additional Bonds (other than additional Bonds issued based on deposited cash and, under certain circumstances, retirement of Bonds). MATERIAL CHANGES IN FINANCIAL CONDITION Chugach maintained a stable asset base from 1996 to 1997. Notable changes among the components include: a decrease in restricted cash (margins from economy energy sales or rate stabilization fund) caused by the return of these funds to the ratepayers (through the fuel surcharge mechanism); a decrease in restricted construction funds due to the reimbursement of general fund cash for construction expenditures incurred; and an increase in accounts receivable caused in large part by the remaining uncollected fuel surcharge balance as well as additional uncollected reimbursements from the Standard Steel matter. Chugach reacquired an additional $5 million of its Series A 2022 bonds during 1997. Also, a $15 million bond (CoBank 5) was issued under the CoBank Supplemental Indenture. These activities represent the major change in long-term obligations during 1997. Notable changes to other liabilities include: a lower balance outstanding on the short-term lines of credit due to an adequate liquidity position at year-end; an increase in accounts payable largely due to the timing of payments to contractors; a lower balance in other liabilities caused by the return of both the rate stabilization and submarine cable reserve funds during 1997; and the decrease in deferred credits resulting from the annual amortization of the original refinancing gain. LIQUIDITY AND CAPITAL RESOURCES Chugach satisfies its operational and capital cash requirements through internally generated funds, a $50 million line of credit with the NRUCFC and a $35 million line of credit with CoBank. At December 31, 1997, no balance was outstanding on the NRUCFC line. The NRUCFC line of credit expires October 14, 2002. At December 31, 1997, no amount was outstanding on the CoBank line. The CoBank line of credit expires August 1, 1998, but carries an annual automatic renewal clause. 26 Chugach's capital improvement requirements are based on long-range plans and other supporting studies and are executed through a five-year construction work plan. Five-year work plans are fully developed and updated every year. Shown below is an estimate of capital expenditures for the years 1998 through 2002: 1998 $28.0 million 1999 $40.0 million 2000 $48.2 million 2001 $30.1 million 2002 $22.5 million Following is a five-year summary of anticipated capital credit retirements: Year ending Wholesale Retail Total 1998 $ 1,533,000 $ 2,146,000 $ 3,679,000 1999 0 1,975,000 1,975,000 2000 0 1,308,000 1,308,000 2001 0 1,497,000 1,497,000 2002 0 1,672,000 1,672,000 27 Chugach's outstanding long-term obligations and maturity at December 31, 1997 are as follows: First mortgage bonds of 8.08% maturing in 2002 and 9.14% maturing in 2022, with interest payable semiannually March 15 and September 15: 8.08% $ 28,848,000 9.14% 217,705,000 CoBank 8.95% bond maturing in 2002, with interest payable monthly .......................................... 1,352,847 CoBank 7.76% bond maturing in 2005, with interest payable monthly .......................................... 10,000,000 CoBank 6.65% (variable rate, repriced monthly) bonds maturing 2022, with interest payable monthly ................................................. 45,000,000 CoBank 6.65% (variable rate repriced monthly) bonds maturing in 2002, 2007 and 2012 with interest payable monthly ................................... 15,000,000 Capital lease for computer equipment at an interest rate of 9.10% with monthly payments of approximately $1,700 through July 1998 ............................................... 14,166 ------------ Total long-term obligations ........................................ 317,920,013 Less current installments ................................................ 5,913,512 Long-term obligations, excluding current installments ............................................. $312,006,501 ------------
28 Sinking Fund Principal maturities requirements Year ending First CoBank December 31 mortgage bonds mortgage bonds Capital leases Total 1998 $ 5,643,000 $ 256,346 $14,166 $ 5,913,512 1999 5,809,000 279,802 - 6,088,802 2000 6,067,000 305,405 - 6,372,405 2001 6,097,000 333,350 - 6,430,350 2002 5,232,000 5,177,944 - 10,409,944 Thereafter 217,705,000 65,000,000 - 282,705,000 ------------ ---------- --------- ----------- $ 246,553,000 $ 71,352,847 $ 14,166 $ 317,920,013 ------------ ---------- ------- ----------- On September 19, 1991, Chugach issued $314 million of First Mortgage Bonds, 1991 Series A Bonds, for purposes of repaying existing debt to the FFB and the REA. Pursuant to Section 311 of the Rural Electrification Act, Chugach was permitted to prepay the REA debt at a discounted rate of approximately 9%, resulting in a discount of approximately $45 million. The gain on prepayment was deferred at December 31, 1991 because Chugach expected to pass the benefit of the gain through to ratepayers prospectively in the form of lower rates. In April 1992, Chugach received formal approval from the APUC to defer the gain and amortize it into income over the life of the bonds. Annual amortization for 1997 was $1.6 million. Annual amortization for 1996 was $1.7 million and for 1995 was $2.2 million. Chugach has negotiated a supplemental indenture (Third Supplemental Indenture of Trust) with CoBank which previously allowed up to $80 million in future bond financing. Recently Chugach finalized an amendment to the Third Supplemental Indenture of Trust (Seventh Supplemental Indenture of Trust) that eliminates the maximum aggregate amount of bonds the company may issue under the agreement. At December 31, 1997, Chugach had bonds in the amount of $71.4 million outstanding under this financing arrangement. The balance is comprised of a $1.4 million bond (CoBank 1) that carries an interest rate of 8.95% maturing in 2002, a $10 million bond (CoBank 2) priced at 7.76% due in 2005, a $21.5 million bond (CoBank 3), currently priced at 6.65% (repriced periodically), a $23.5 million bond (CoBank 4) currently priced at 6.65% (also repriced periodically), and a $15 million bond (CoBank 5) currently priced at 6.65% (also repriced periodically) due in 2002, 2007 and 2012. Principal payments on the CoBank 3 and 4 bonds commence in 2003 and continue through 2022. Additionally, Chugach has negotiated a similar supplemental indenture (Fifth Supplemental Indenture of Trust) with NRUCFC for $80 million. At December 31, 1997 there were no amounts outstanding under this financing arrangement. Chugach management expects that cash flows from operations and external funding sources will be sufficient to cover operational and capital funding requirements in 1998 and thereafter. 29 YEAR 2000 Chugach has considered the impact of Year 2000 issues on its computer systems and applications and developed a remediation plan. Chugach's consideration included not only financial information systems, but applications in operational areas and the impact of interaction with suppliers, customers and vendors where appropriate. Conversion activities are in process and the Association expects conversion and testing to be completed by April 1999. Expenditures in 1997 for the Year 2000 project amounted to approximately $1.7 million and the Association expects that completion of the project will result in additional expenditures of approximately $2.9 million. ENVIRONMENTAL MATTERS Compliance with Environmental Standards Chugach's operations are subject to certain Federal, State and local environmental laws which Chugach monitors to ensure compliance. The costs associated with environmental compliance are included as a component of both the operating and capital budget processes. Chugach accrues for costs associated with environmental remediation obligations when such costs are probable and reasonably estimable. Standard Steel Salvage Yard Site A cost recovery action was filed in Federal District Court on December 27, 1991 by the United States against Chugach and six other Potentially Responsible Parties (PRPs) seeking reimbursement of removal and response action costs (Past Response Costs) incurred by US EPA at the Standard Steel and Metals Salvage Yard Superfund Site in Anchorage, Alaska (Site). The six other PRPs named in the action are the Alaska Railroad, Westinghouse Electric Corporation, Sears, Roebuck and Co., Montgomery Ward & Co., J.C. Penney Company, Inc. and Bridgestone/Firestone, Inc. In December, 1996, Chugach, the other named PRPs and certain federal agency PRPs (Federal PRPs) entered into a Partial Consent Decree. Under the Partial Consent Decree, Chugach and the other parties settled claims for Past Response Costs as well as investigation and other costs incurred with respect to the Site through December 1996. The Partial Consent Decree, however, did not settle Chugach's liability for future costs of designing and performing the cleanup at the Site (Future Costs). Although the Partial Consent Decree did not settle Chugach's or the other private PRPs' liability for Future Costs, the Partial Consent Decree binds the Federal PRPs and the Alaska Railroad to pay an aggregate share of 64% of Future Costs. Chugach and the five other private PRPs have reached a separate settlement to divide the remaining 36% of Future Costs among themselves. Under that settlement, Chugach's percentage share of liability for Future Costs will equal 14.89%. The private PRPs' agreement to perform remedial design and remedial action (RD/RA) at the Site is memorialized in a new Consent Decree (RD/RA Decree) that was entered by the Federal District Court in January 1998. The RD/RA Decree contains the scope of work for the RD/RA as well as settlement terms, including EPA's covenant not to sue Chugach and the other private PRPs for Future Costs once the RD/RA is completed. The estimate of Future Costs of RD/RA at the Site, as determined by Chugach's consultants 30 based on cost estimates contained in the FS report, ranges from $5,231,200 to $6,619,800. The RD/RA Decree contains a cost estimate, as determined by EPA and including a 50% cost overrun contingency, of $8,400,000. Chugach's share of these estimated RD/RA expenses would range from approximately $778,926 to $1,250,760. Based on recent bid documents for the remedial action, it seems unlikely that the RD/RA will cost as much as EPA's high-end estimate. These amounts are only estimates, however, and cannot be definitively known until the RD/RA work at the Site is completed in late 1998 or 1999. Under the RD/RA Decree, Chugach and the other PRPs are required to reimburse the United States for EPA oversight costs and DOJ enforcement costs relating to the RD/RA. Those costs have been estimated by the United States to equal approximately $676,000. Chugach's share of these estimated oversight and enforcement costs would equal $100,656. In addition, one of the private PRPs, Montgomery Ward, recently filed for bankruptcy protection and did not execute the RD/RA Consent Decree. As a result, Chugach will be paying an additional sum equal to Chugach's percentage share of Montgomery Ward's share of Future Costs. This additional sum is estimated to be approximately $12,600 given current estimates of Future Costs, EPA oversight costs and DOJ enforcement costs. Based on the above estimates, the total amount that may be owed by Chugach under the RD/RA Decree ranges from approximately $892,182 to $1,364,016. These amounts, particularly the projected EPA oversight costs, are only estimates and are subject to change, although, in light of recent bid documents, Chugach does not anticipate that the costs will reach the high-end estimate. In addition, the RD/RA Decree contains reservation of rights allowing EPA to seek further response actions and payments from the PRPs under certain circumstances, including for costs associated with alleged natural resource damages and no prediction can be made whether EPA will request activities through its reservation of rights under the RD/RA Decree. Four of Chugach's insurance carriers have been paying, under a reservation of rights, Chugach's costs of defense for the Site. The carriers reserved their rights regarding indemnification of Chugach for response costs. In February 1998, Chugach reached an agreement in principle with these four insurance carriers pursuant to which the carriers will pay the majority of Chugach's costs relating to the Site, including all Past Costs and Future Costs. This settlement preserves Chugach's potential claim for natural resource damages and is anticipated to result in Chugach paying no more that $500,000 for all Site costs. Management believes that the latter amount would be fully recoverable in rates and therefore would have no impact on Chugach's financial condition or results of operations. OUTLOOK Nationwide, the electric utility industry is entering a period of unprecedented competition. Electric utilities in Alaska will not be immune from these competitive forces. Chugach has taken several steps to be more effectively positioned to meet the challenge of a competitive market for electricity. Chugach participates in national benchmarking projects to improve system operations. Recent 31 studies have focused on mailroom operations, remittance processing, new service connections, system reliability and power production. As a result of these studies, Chugach has been able to make these processes more efficient which has led to lower costs. The Association is committed to continue reviewing all areas of its operations and to serve its customers in a way that maintains high reliability while containing the cost of electricity. In addition to participation in benchmarking studies, Chugach has also implemented strategic alliances in the purchasing and warehousing areas. These alliances are designed to improve efficiency and thus, contribute to lower operating costs. In 1997, Chugach was able to lower inventory unit costs, increase inventory turns and decrease project cost by furnishing materials to contractors as a direct result of these strategic alliances. Chugach will continue to explore other areas for strategic alliance opportunities. During 1997, Chugach adopted a new strategic plan. In this plan, priority issues were identified that are critical to the company's success. In addition, key result area targets were developed that will track the most important measures of Chugach's performance. As the operating environment changes, the strategic plan will continue to be adapted and further developed to reflect the new market conditions. Chugach has been extensively involved in the effort to introduce customer choice for electric service in Anchorage. After several customers in a neighboring utility's service area formally asked Chugach to provide their electric power, Chugach requested access over the other utility's distribution and transmission system and asked the APUC to enforce the request. At this time, the APUC has not ruled on this request and it is not possible to predict their decision. Chugach has been active at the State legislative level in support of the customer's right to choose their electric power supplier. Virtually all Alaskan utilities have opposed Chugach's efforts to develop competition and are active in attempting to create exclusive service territories. At this time, however, no bill relating to customer choice has moved out of committee. Thus, it is not possible to predict the outcome of this legislative process. Chugach has also made organizational changes in preparation for competition. Recognizing that the new marketplace will probably be "unbundled" along the functional lines of generation, transmission and distribution, and retail services, Chugach's new organizational structure reflects these functions. Chugach now operates with three divisions: Finance and Energy Supply, Transmission and Distribution Network Services and Retail Services. This structure will better allow Chugach to compete in the rapidly changing electric utility industry. In addition, Chugach has formed a Marketing Department, continues to operate its Key Account program for larger customers and continues to develop new services to enhance existing customer's satisfaction. Chugach has three collective bargaining agreements with the IBEW that are currently open for negotiation. Although each of the contracts has an expiration date of January 31, 1998, the parties have agreed that the contracts shall continue in effect until new contracts are put in place. If the parties cannot agree on the terms of new agreements, all outstanding issues will 32 be decided through interest arbitration. The Union cannot strike and Chugach cannot lockout under the continuing agreement. 33 Item 8 - Financial Statements and Supplementary Data December 31, 1997 and 1996 Independent Auditors' Report The Board of Directors Chugach Electric Association, Inc.: We have audited the accompanying balance sheets of Chugach Electric Association, Inc. as of December 31, 1997 and 1996, and the related statements of revenues, expenses and patronage capital and cash flows for each of the years in the three-year period ended December 31, 1997. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chugach Electric Association, Inc. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. Anchorage, Alaska /s/ KPMG Peat Marwick LLP February 20, 1998 34 CHUGACH ELECTRIC ASSOCIATION, INC. Balance Sheets December 31, 1997 and 1996 Assets 1997 1996 ------------ ------------ Utility plant (notes 2, 13 and 14): Electric plant in service ................ $625,365,803 $615,464,060 Construction work in progress ............ 24,664,395 19,826,957 ------------ ------------ 650,030,198 635,291,017 Less accumulated depreciation ............ 232,136,950 215,411,223 ------------ ------------ Net utility plant ...... 417,893,248 419,879,794 ------------ ------------ Other property and investments, at cost: Nonutility property ...................... 3,550 3,550 Investments in associated organizations (note 3) .............................. 7,864,271 7,647,189 Restricted cash - margins from Economy Energy Sales, all repurchase agreements -- 1,599,239 ------------ ------------ 7,867,821 9,249,978 ------------ ------------ Current assets: Cash and cash equivalents, including repurchase agreements of $6,351,291 in 1997 and $6,216,073 in 1996 ........... 5,224,529 5,419,819 Cash - restricted construction funds ..... 364,778 1,371,386 Special deposits ......................... 151,703 89,232 Accounts receivable, less provision for doubtful accounts of $368,029 in 1997 and $367,085 in 1996 .................. 23,999,138 15,369,883 Materials and supplies, at average cost .. 15,619,085 16,187,592 Prepayments .............................. 558,371 694,257 Other current assets ..................... 305,415 294,380 ------------ ------------ Total current assets ..... 46,223,019 39,426,549 ------------ ------------ Deferred charges (notes 9 and 15) ............. 13,583,211 13,932,109 ------------ ------------ $485,567,299 $482,488,430 ------------ ------------
See accompanying notes to financial statements. 35 CHUGACH ELECTRIC ASSOCIATION, INC. Balance Sheets, Continued December 31, 1997 and 1996 Liabilities 1997 1996 ------------ ------------ Equities and margins (note 11): Memberships .................................$ 861,543 $ 812,748 Patronage capital (note 4) .................. 104,800,092 100,685,517 Other (note 5) .............................. 3,458,062 2,979,677 ------------ ------------ 109,119,697 104,477,942 ------------ ------------ Long-term obligations, excluding current installments (notes 6, 7 and 11) First mortgage bonds payable ................ 240,910,000 251,553,000 National Bank for Cooperatives bonds payable .................................... 71,096,501 56,352,847 ------------ ------------ 312,006,501 307,905,847 ------------ ------------ Current liabilities: Notes payable (note 6) ...................... -- 2,750,000 Current installments of long-term debt and capital leases (notes 6, 7 and 11) ....... 5,913,512 5,971,752 Accounts payable ............................ 7,038,234 5,178,161 Consumer deposits ........................... 1,038,241 1,066,906 Accrued interest ............................ 6,904,335 7,076,388 Salaries, wages and benefits ................ 3,655,101 3,583,422 Fuel ........................................ 6,611,415 6,047,574 Other (note 15) ............................. 3,300,310 5,012,191 ------------ ------------ Total current liabilities .... 34,461,148 36,686,394 ------------ ------------ Deferred credits (note 12) ....................... 29,979,953 33,418,247 ------------ ------------ $485,567,299 $482,488,430 ------------ ------------
See accompanying notes to financial statements. 36 CHUGACH ELECTRIC ASSOCIATION, INC. Statements of Revenues, Expenses and Patronage Capital Years ended December 31, 1997, 1996 and 1995 1997 1996 1995 ------------- ------------- ------------- Operating revenues ................... $ 143,947,730 $ 134,876,668 $ 129,379,308 ------------- ------------- ------------- Operating expenses: Production ...................... 45,879,337 37,066,444 31,533,567 Purchased power ................. 14,033,282 10,024,483 10,136,623 Transmission .................... 3,378,540 3,667,039 3,460,823 Distribution .................... 8,640,443 8,789,683 10,008,020 Consumer accounts ............... 4,955,838 6,978,856 7,089,847 Administrative, general and other 15,071,966 13,713,690 14,395,125 Depreciation .................... 21,111,584 20,673,609 19,296,356 ------------- ------------- ------------- Total operating expenses 113,070,990 100,913,804 95,920,361 ------------- ------------- ------------- Interest: On long-term debt ............... 24,942,281 25,029,257 25,559,725 Charged to construction - credit (629,764) (616,090) (1,114,928) On short-term debt .............. 771,844 935,883 612,375 ------------- ------------- ------------- Net interest ............ 25,084,361 25,349,050 25,057,172 ------------- ------------- ------------- Net operating margins ... 5,792,379 8,613,814 8,401,775 Nonoperating margins: Interest income ................. 632,191 695,699 730,041 Other ........................... 520,414 566,908 351,586 Property gain (loss) ............ 609,413 (45,050) (477,209) ------------- ------------- ------------- Assignable margins ....... 7,554,397 9,831,371 9,006,193 Patronage capital at beginning of year 100,685,517 95,421,358 91,079,686 Retirement of capital credits and estate payments (note 4) .......... (3,439,822) (4,567,212) (4,664,521) ------------- ------------- ------------- Patronage capital at end of year ..... $ 104,800,092 $ 100,685,517 $ 95,421,358 ------------- ------------- -------------
See accompanying notes to financial statements. 37 CHUGACH ELECTRIC ASSOCIATION, INC. Statements of Cash Flows Years ended December 31, 1997, 1996 and 1995 1997 1996 1995 ------------ ------------ ------------ Cash flows from operating activities: Assignable margins ........................................................ $ 7,554,397 $ 9,831,371 $ 9,006,193 ------------ ------------ ------------ Adjustments to reconcile assignable margins to net cash provided by operating activities: Depreciation and amortization ............................................. 23,532,263 23,221,162 21,846,611 Capitalized interest ...................................................... (799,999) (809,302) (1,354,273) Property (gains) losses and obsolete inventory write-off .................. (609,413) 45,050 477,434 Other ..................................................................... (241,317) (265,643) 343,806 Changes in assets and liabilities: (Increase) decrease in assets: Special deposits ..................................................... (62,471) 8,557 (44,332) Accounts receivable .................................................. (8,629,254) 1,738,940 (3,492,435) Notes receivable ..................................................... -- -- 2,533 Prepayments .......................................................... 135,886 (19,140) 194,790 Materials and supplies, net .......................................... 568,507 2,311,191 1,527,094 Deferred charges ..................................................... (2,299,547) (4,581,795) (2,222,963) Other ................................................................ (11,035) 117,829 (14,740) Increase (decrease) in liabilities: Accounts payable ..................................................... 1,860,074 (1,481,316) 3,125,594 Accrued interest ..................................................... (172,052) (976,398) (136,434) Deferred credits ..................................................... (755,366) (8,023,874) (3,274,768) Consumer deposits, net ............................................... (28,665) (52,150) (73,789) Other ................................................................ (1,076,365) 5,956,463 389,099 ------------ ------------ ------------ Total adjustments ............................................... 11,411,246 17,189,574 17,293,227 ------------ ------------ ------------ Net cash provided by operating activities .................................................... 18,965,643 27,020,945 26,299,420 ------------ ------------ ------------ Cash flows from investing activities: Extension and replacement of plant ........................................ (17,487,859) (20,605,093) (22,058,887) Decrease in investments in associated organizations ....................... 24,235 132,261 267,393 ------------ ------------ ------------ Net cash (used) in investing activities ......................... (17,463,624) (20,472,832) (21,791,494) ------------ ------------ ------------ Cash flows from financing activities: Transfer of restricted construction funds ................................. 1,006,608 (1,371,386) -- Net increase (decrease) in notes payable .................................. (2,750,000) (5,250,000) 500,000 Proceeds from long-term debt .............................................. 15,000,000 45,000,000 10,000,000 Repayments of long-term debt .............................................. (10,957,586) (42,429,853) (8,312,527) Memberships and donations received (refunded) ............................. 527,179 (16,768) 309,821 Retirement of patronage capital ........................................... (3,439,822) (4,567,212) (4,664,521) Increase in (refunds) and transfers of consumer advances for construction ........................................................ (1,083,688) 1,627,442 (1,309,828) ------------ ------------ ------------ Net cash used by financing activities ................................................... (1,697,309) (7,007,777) (3,477,055) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents .................................................. (195,290) (459,664) 1,030,871 Cash and cash equivalents at beginning of year ................................. 5,419,819 5,879,483 4,848,612 ------------ ------------ ------------ Cash and cash equivalents at end of year ....................................... $ 5,224,529 $ 5,419,819 $ 5,879,483 ------------ ------------ ------------ Supplemental disclosure of cash flow information - ............................. $ 25,256,413 $ 26,325,449 $ 25,193,606 ------------ ------------ ------------ interest expense paid, net of amounts capitalized
See accompanying notes to financial statements. 38 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements December 31, 1997 and 1996 (1) Description of Business and Summary of Significant Accounting Policies Description of Business Chugach Electric Association, Inc. (Association or Chugach) is the largest electric utility in Alaska. The Association is engaged in the generation, transmission and distribution of electricity to directly served retail customers in the Anchorage and upper Kenai Peninsula areas. Through an interconnected regional electrical system, Chugach's power flows throughout Alaska's Railbelt, a 400-mile-long area stretching from the coastline of the southern Kenai Peninsula to the interior of the state, including Alaska's largest cities, Anchorage and Fairbanks. Chugach also supplies much of the power requirements of three wholesale customers, Matanuska Electric Association (MEA), Homer Electric Association (Homer) and the City of Seward (Seward). The Association operates on a not-for-profit basis and, accordingly, seeks only to generate revenues sufficient to pay operating and maintenance costs, the cost of purchased power, capital expenditures, depreciation, and principal and interest on all indebtedness and to provide for the establishment of reasonable margins and reserves. The Association is subject to the regulatory authority of the Alaska Public Utilities Commission (APUC). Management Estimates In preparing the financial statements, management of the Association is required to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and revenues and expenses for the reporting period. Actual results could differ from those estimates. Summary of Significant Accounting Policies Regulation The accounting records of the Association conform to the Uniform System of Accounts as prescribed by the Federal Energy Regulatory Commission. The Association meets the criteria, and accordingly, follows the accounting and reporting requirements of Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS 71). Revenues in excess of current period costs (net operating margins and nonoperating margins) in any year are designated on the Association's statement of revenues and expenses as assignable margins. Retained assignable margins are designated on the Association's balance sheet as patronage capital, which is assigned 39 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements to each member on the basis of patronage. This patronage capital constitutes the principal equity of the Association. In July 1997, the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) reached a consensus on EITF 97-4 "Deregulation of the Pricing of Electricity - Issues Related to the Application of FASB Statements No. 71 and No 101." This issue discusses when an enterprise should stop applying FAS No. 71 to the separable portion of its business whose product or service pricing is being deregulated and how a company should account for its stranded costs after it has discontinued the application of FAS No. 71. It also provides guidance with respect to the evaluation of regulatory assets and liabilities and concluded that these items should be determined on the basis of where in the business the regulated cash flows to realize and settle them will be derived. The Association's current method of accounting is consistent with the EITF. The Association performs an annual evaluation of the requirements of SFAS 71 and related exposures. Reclassifications Certain reclassifications have been made to the 1995 and 1996 financial statements to conform to the 1997 presentation. Plant Additions and Retirements Additions to electric plant in service are recorded at original cost of contracted services, direct labor and materials, and indirect overhead charges. For property replaced or retired, the average unit cost of the property unit, plus removal cost, less salvage, is charged to accumulated provision for depreciation. The cost of replacement is added to electric plant. The Association implemented Statement of Financial Accounting Standards No.121, Accounting for the Impairment of Long Lived Assets and Long Lived Assets to be Disposed Of in 1996. There was no material impact on the financial statements. In 1994 the Association completed a feasibility study concerning the desirability of implementing Smaller Retirement Unit accounting. The Association implemented Smaller Retirement Unit accounting in 1995. Smaller Retirement Unit accounting allows for the capitalization of generation major component costs which would have been expensed as maintenance under the previous capitalization methodology. 40 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements Operating Revenues Operating revenues are based on billing rates authorized by the APUC which are applied to customers' usage of electricity. Included in operating revenue are billings rendered to customers adjusted for differences in meter read dates from year to year. The Association's tariffs include provisions for the flow through of gas cost increases pursuant to existing gas supply contracts. During 1988 the Association commenced some sales of energy at a price which contemplates the future replacement cost of the gas used to generate such energy, referred to as Economy Energy Sales. Pursuant to an order by the APUC, 80% of the margins from Economy Energy Sales is deferred to mitigate future gas price increases. Return of these deferred margins, plus accrued interest earnings, to ratepayers began in June 1996, when the transition from lower priced natural gas to higher priced natural gas occurred. These margins were returned, over a twelve month period, in the form of a credit to the Fuel Cost Recovery Adjustment (FCRA) factor. In 1997, Chugach experienced higher than anticipated fuel and purchased power costs that were considered unusual and transitory in nature. In an effort to maintain overall price stability, Chugach requested and was granted a waiver by the APUC to leave fuel surcharge rates at the computed second quarter 1997 level through the fourth quarter 1997. Further, Chugach elected to forego collection of approximately $3,500,000 of fuel and purchased power costs (representing cumulative uncollected fuel surcharge through May 1997). Routine quarterly adjustments have resumed and fuel surcharge rates increased effective January 1998. June through December 1997 undercollected fuel and purchased power costs will be recovered throughout 1998 under a plan approved by the APUC. In August 1996, the Board of Directors approved a petition to the Alaska Public Utilities Commission (APUC) to withdraw from the Simplified Rate Filing (SRF) process. This petition was submitted to the APUC as part of Docket U-96-37, which was opened to resolve rate disputes with Chugach's wholesale customers. Interim-refundable rates for wholesale customers were ordered pending resolution of the docket. In February 1997, the APUC approved a Settlement Agreement between Chugach and its wholesale customers resolving issues in the docket and establishing permanent rates. As part of the APUC order, the Association was required to file Cost of Service and Revenue Requirement Studies. These studies were filed in March 1997. As part of the Settlement Agreement, the wholesale customers agreed not to oppose Chugach's withdrawal from SRF. The APUC orders have not addressed Chugach's withdrawal from SRF but Chugach anticipates approval of its petition. Future rate changes will be applied for through general rate case and other normal APUC procedures. At December 31, 1997, 41 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements Docket U-96-37 had not been closed. A provision for a wholesale rate refund of $980,389 was recorded at December 31, 1997 to accommodate certain rate adjustment clauses contained in the Settlement Agreement. Investments in Associated Organizations Investments in associated organizations represent capital requirements as part of financing arrangements. The Association has the intent and ability to hold these investments to maturity, and accordingly has elected to account for them at cost under SFAS 115. Deferred Charges and Credits Deferred charges, representing regulatory assets, are amortized to operating expense over the period allowed for rate-making purposes, generally five years. Nonrefundable contributions in aid of construction are credited to the associated cost of construction of property units. Refundable contributions in aid of construction are held in deferred credits pending their return or other disposition. Depreciation and Amortization Depreciation and amortization rates have been applied on a straight-line basis and at December 31, 1997 are as follows: Rate (%) Steam production plant 2.68 - 2.95 Hydraulic production plant 1.33 - 2.24 Other production plant 3.46 - 7.07 Transmission plant 1.85 - 5.00 Distribution plant 2.10 - 6.67 General plant 2.22 - 25.00 Other 1.88 - 2.75 In 1994, the first phase of a three part phase-in of new depreciation rates occurred as APUC approved rates for submarine cables (Transmission plant) were implemented. The impact of utilization of these new depreciation rates on the financial statements was not material. In 1995, the balance of Transmission plant, all of Distribution plant and 42 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements General plant rates were implemented. In 1996, new Generation plant depreciation rates were implemented. In 1997 an update of the Depreciation Study was completed utilizing Electric Plant in Service balances as of December 31, 1995. Depreciation rates developed in that Study will be implemented in January, 1998. No phase-in of rates is required by the APUC. Capitalized Interest Allowance for funds used during construction and interest charged to construction - credit are the estimated costs during the period of construction of equity and borrowed funds used for construction purposes. The Association capitalized such funds at the average rate (adjusted monthly) of 8.3% during 1997, 8.6% during 1996 and 8.2% during 1995. Cash and Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments with a maturity of three months or less upon acquisition by the Association (excluding restricted cash and investments) to be cash equivalents. Fair Value of Financial Instruments Statement of Financial Accounting Standards 107, Disclosures About the Fair Value of Financial Instruments, requires disclosure of the fair value of certain on and off balance sheet financial instruments for which it is practicable to estimate that value. The following methods are used to estimate the fair value of financial instruments: Cash and cash equivalents and restricted cash - the carrying amount approximates fair value because of the short maturity of those instruments. Investments in associated organizations - the carrying amount approximates fair value because of limited marketability and current market interest rates which approximate interest rates on the investments. Consumer deposits - the carrying amount approximates fair value because of the short refunding term. Notes payable - the carrying amount approximates fair value because of the short maturity of the notes. Long-term obligations - the fair value is estimated based on the quoted market price for same or similar issues (note 7). 43 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements Environmental Remediation Costs The Association accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Such accruals are adjusted as further information develops or circumstances change. Estimates of future costs for environmental remediation obligations are not discounted to their present value. 2) Utility Plant Summary Major classes of electric plant as of December 31 are as follows: 1997 1996 ------------ ------------ Electric plant in service: Steam production plant ................ $ 60,392,869 $ 60,392,869 Hydraulic production plant ............ 8,798,695 8,798,695 Other production plant ................ 108,067,665 107,278,076 Transmission plant .................... 191,960,788 189,961,660 Distribution plant .................... 151,076,058 144,939,571 General plant ......................... 62,575,576 61,174,312 Unclassified electric plant in service 35,941,017 37,533,642 Equipment under capital lease ......... 56,323 674,323 Other ................................. 6,496,812 4,710,912 ------------ ------------ Total electric plant in service ... 625,365,803 615,464,060 Construction work in progress ............ 24,664,395 19,826,957 ------------ ------------ Total electric plant in service and construction work in progress ... $650,030,198 $635,291,017 ------------ ------------
Depreciation of unclassified electric plant in service has been included in functional plant depreciation accounts in accordance with the anticipated eventual classification of the plant investment. 44 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (3) Investments in Associated Organizations Investments in associated organizations include the following at December 31: 1997 1996 ---- ---- National Rural Utilities Cooperative Finance Corporation (NRUCFC) $ 6,095,980 $ 6,095,980 National Bank for Cooperatives (CoBank) 1,565,097 1,352,010 NRUCFC capital term certificates 32,300 29,120 Other 170,894 170,079 --------- --------- $ 7,864,271 $ 7,647,189 --------- --------- The Farm Credit Administration, CoBank's federal regulators, requires minimum capital adequacy standards for all Farm Credit System institutions. CoBank's loan agreements require, as a condition of the extension of credit, that an equity ownership position be established by all borrowers. The Association's investment in NRUCFC similarly was required by its financing arrangements with NRUCFC. The investments in NRUCFC and CoBank mature at various dates through 2020 and bear interest at rates ranging from 3% to 5%. (4) Patronage Capital The Association has approved an Equity Management Plan which established in general, a ten-year (for wholesale customers) and twenty-year (for retail customers) capital credit retirement of patronage capital, based on the members' proportionate contribution to Association assignable margins. At December 31, 1997, out of the total of $104,800,092 patronage capital, the Association had assigned $97,245,695 of such patronage capital (net of capital credit retirements). Approval of actual capital credit retirements is at the discretion of the Association's Board of Directors. In November 1996, the Board of Directors approved the retirement of $1,868,785 of retail capital credits representing 50 percent of the 1983 retail patronage. In December 1996, the Board of Directors authorized the retirement of $2,135,078 of wholesale capital credits from 1986 resulting in an authorized 1996 distribution of $4,003,863. A special return of wholesale capital credits in the amount of $392,136 was authorized by the Board of Directors under the terms of APUC Docket U-92-10. In December 1997, the Board of Directors authorized the retirement of $1,859,730 of retail capital credits representing the remaining 1983 patronage capital. The Board of Directors also authorized the retirement of 1987 wholesale capital credits in the amount of $1,205,510 in December 1997. A special 45 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements wholesale capital credit retirement of $88,818, representing wholesale margins from 1985, was authorized in December 1997. Following is a five-year summary of anticipated capital credit retirements: Year ending Wholesale Retail Total 1998 $ 1,533,000 $ 2,146,000 $ 3,679,000 1999 0 1,975,000 1,975,000 2000 0 1,308,000 1,308,000 2001 0 1,497,000 1,497,000 2002 0 1,672,000 1,672,000 (5) Other Equities A summary of other equities at December 31 follows: 1997 1996 ---- ---- Nonoperating margins, prior to 1967 $ 23,625 $ 23,625 Donated capital 186,199 183,580 Unredeemed capital credit retirement 3,248,238 2,772,472 ---------- ---------- $ 3,458,062 $ 2,979,677 ---------- ---------- 46 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (6) Long-term Obligations Long-term obligations at December 31 are as follows: 1997 1996 ------------ ------------ First mortgage bonds of 8.08% maturing in 2002 and 9.14% maturing in 2022, with interest payable semiannually March 15 and September 15: 8.08% $ 28,848,000 $ 34,554,000 9.14% 217,705,000 222,705,000 CoBank 8.95% bond maturing in 2002, with interest payable monthly .......................................... 1,352,847 1,587,703 CoBank 7.76% bond maturing in 2005, with interest payable monthly .......................................... 10,000,000 10,000,000 CoBank 6.65% (variable rate, repriced monthly) bonds maturing 2022, with interest payable monthly ................................................. 45,000,000 45,000,000 CoBank 6.65% (variable rate repriced monthly) bonds maturing in 2002, 2007 and 2012 with interest payable monthly ................................... 15,000,000 -- Capital lease for computer equipment at an interest rate of 9.10% with monthly payments of approximately $1,700 through July 1998 ............................................... 14,166 30,896 ------------ ------------ Total long-term obligations ........................................ 317,920,013 313,877,599 Less current installments ................................................ 5,913,512 5,971,752 ------------ ------------ Long-term obligations, excluding current installments ............................................. $312,006,501 $307,905,847 ------------ ------------
Substantially all assets are pledged as collateral for the long-term obligations. Under provisions of its financing arrangements with CoBank (Third Supplemental Indenture of Trust, as amended by the Seventh Supplemental Indenture of Trust), there is no limit on the maximum aggregate amount of bonds which may be issued. Chugach has also negotiated a supplemental indenture with NRUCFC (Fifth Supplemental Indenture of Trust) for $80 million, with no amounts outstanding at December 31, 1997. 47 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements Maturities of Long-term Obligations Long-term obligations at December 31, 1997 mature as follows: Sinking Fund Principal maturities requirements Year ending First CoBank December 31 mortgage bonds mortgage bonds Capital leases Total 1998 $ 5,643,000 $ 256,346 $14,166 $ 5,913,512 1999 5,809,000 279,802 - 6,088,802 2000 6,067,000 305,405 - 6,372,405 2001 6,097,000 333,350 - 6,430,350 2002 5,232,000 5,177,944 - 10,409,944 Thereafter 217,705,000 65,000,000 - 282,705,000 ------------ ---------- --------- ----------- $ 246,553,000 $ 71,352,847 $ 14,166 $ 317,920,013 ------------ ---------- ------- ----------- Lines of Credit The Association had an annual line of credit of $35,000,000 in 1997 and 1996 available with CoBank. The CoBank line of credit expires August 1, 1998 but carries an annual automatic renewal clause. At December 31, 1997 and 1996, there was no outstanding balance on this line of credit. In addition, the Association had an annual line of credit of $50,000,000 available at December 31, 1997 and 1996 with NRUCFC. At December 31, 1997 there was no outstanding balance on this line of credit. At December 31, 1996, $2,750,000 was outstanding at an interest rate of 6.35%. The NRUCFC line of credit expires October 14, 2002. Refinancing On September 19, 1991, Chugach issued $314,000,000 of First Mortgage Bonds, 1991 Series A (Bonds), for purposes of repaying existing debt to the Federal Financing Bank and the Rural Electrification Administration (now Rural Utilities Services). Pursuant to Section 311 of the Rural Electrification Act, Chugach was permitted to prepay the REA debt at a discounted rate of approximately 9%, resulting in a discount of approximately $45,000,000 (note 12). 48 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements The bonds maturing in 2002 (Series A 2002 Bonds) are subject to annual sinking fund redemption at 100% of the principal amount thereof which commenced March 15, 1993. The bonds maturing in 2022 (Series A 2022 Bonds) are subject to annual sinking fund redemption at 100% of the principal amount thereof commencing March 15, 2003. The Series A 2002 Bonds are not subject to optional redemption. The Series A 2022 Bonds are redeemable at the option of Chugach on any interest payment date at an initial redemption price commencing in 2002 of 109.140% of the principal amount thereof declining ratably to par on March 15, 2012. The Bonds are secured by a first lien on substantially all of Chugach's assets. The Indenture prohibits outstanding short-term indebtedness (other than trade payables) in excess of 15% of Chugach's net utility plant and limits certain cash investments to specific securities. In December 1995, Chugach reacquired $2,500,000 of the Series A 2022 Bonds at a premium of 116.8795. Total transaction cost, including accrued interest and premium, was $2,982,286. In February 1996, Chugach reacquired $2,445,000 of the Series A 2022 Bonds at a premium of 117.5000. Total transaction cost, including accrued interest and premium, was $2,970,334. In March 1996, Chugach reacquired $13,150,000 of the Series A 2022 Bonds at a premium of 115.3750. Total transaction cost, including accrued interest and premium, was $15,762,752. In June 1996, Chugach reacquired $20,000,000 of the Series A 2022 Bonds at a premium of 109.3750. Total transaction costs, including accrued interest and premium was $22,347,233. In September 1996, Chugach reacquired $1,200,000 of the Series A 2022 Bonds at a premium of 108.5280. Total transaction cost, including accrued interest and premium, was $1,356,567. In April 1997, Chugach reacquired $5,000,000 of the Series A 2022 Bonds at a premium of 109.7500. Total transaction cost, including accrued interest and premium, was $5,510,350. 49 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (7) Fair Value of Financial Instruments The estimated fair values (in thousands) of the long-term obligations included in the financial statements at December 31 are as follows: 1997 1996 ---- ---- Carrying Fair Carrying Fair Value Value Value Value Long-term obligations (including current installments) $317,920 $352,755 $313,878 $348,273 Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. (8) Employee Benefits Pension benefits for substantially all employees are provided through the Alaska Electrical Trust and Alaska Hotel, Restaurant and Camp Employees Health and Welfare Trust Funds (union employees) and the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program (nonunion employees). The Association makes annual contributions to the plans equal to the amounts accrued for pension expense. For the union plans, the Association pays a contractual hourly amount per union employee which is based on total plan costs for all employees of all employers participating in the plan. In these master, multiple-employer plans, the accumulated benefits and plan assets are not determined or allocated separately to the individual employer. Pension costs for union plans were approximately $1,810,000 in 1997, $1,889,000 in 1996 and $1,860,000 in 1995. For several years, NRECA did not require contributions to the plan; consequently, no pension cost was incurred. In 1995 the moratorium was in effect from May through December. From January through April 1995, a total of $484,000 was contributed to the NRECA plan. In 1996 the moratorium was in effect from January through September. From October through December 1996, $266,000 was contributed to the NRECA plan. In 1997 approximately $601,000 was contributed to the NRECA plan as the moratorium was not in effect. 50 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (9) Deferred Charges Deferred charges consisted of the following at December 31: 1997 1996 ---- ---- Debt issuance and reacquisition costs $ 4,006,295 $ 4,220,403 Refurbishment of transmission equipment 280,864 290,123 Computer software and conversion 5,596,222 4,702,932 Studies 1,162,416 1,021,820 Fuel supply negotiations 415,042 437,758 Major overhaul of steam generating unit 837,517 1,042,624 Other (note 15) 1,284,855 2,216,449 ---------- ---------- $ 13,583,211 $ 13,932,109 ---------- ---------- (10) Income Taxes The Association is exempt from federal income taxes under the provisions of Section 501(c)(12) of the Internal Revenue Code. (11) Return of Capital Under provisions of its long-term debt agreements, the Association is not directly or indirectly permitted to declare or pay any dividend or make any payments, distributions or retirements of patronage capital to members if an event of default exists with respect to its bonds (event of default), if payment of such distribution would result in an event of default, or if the aggregate amount expended for all distributions on and after September 26, 1991 exceeds the sum of $7,000,000 plus 35% of the aggregate assignable margins (whether or not such assignable margins have since been allocated to members) of the Association earned after December 31, 1990 (or, in the case such aggregate shall be a deficit, minus 100% of such deficit). The Association may declare and make distributions at any time if, after giving effect thereto, the Association's aggregate margins and equities as of the end of the most recent fiscal quarter would be not less than 45% of the Association's total liabilities and equities as of the date of the distribution. The Association does not anticipate that this provision will limit the anticipated capital credit retirements described in note 4. 51 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (12) Deferred Credits Deferred credits at December 31 consisted of the following: 1997 1996 ---- ---- Regulatory liability - unamortized gain on reacquired debt $ 27,477,114 $ 29,726,201 Refundable consumer advances for construction 1,821,002 2,904,690 Estimated initial installation costs for transformers and meters 364,941 470,460 Post retirement benefit obligation 255,700 255,700 Other 61,196 61,196 ----------- ----------- $ 29,979,953 $ 33,418,247 ----------- ----------- In conjunction with the refinancing described in note 6, the Association recognized a gain of approximately $45,000,000. The APUC permitted the Association to flow through the gain to consumers in the form of reduced rates over a period equal to the life of the bonds using the effective interest method; consequently, the gain has been deferred for financial reporting purposes as required by SFAS 71. Amortization of the deferred gain of approximately $1,700,000 was recorded in 1997. Approximately, $2,000,000 of the deferred gain was amortized annually in 1996 and 1995. (13) Bradley Lake Hydroelectric Project The Association is a participant in the Bradley Lake Hydroelectric Project (Bradley Lake). Bradley Lake was built and financed by the Alaska Energy Authority (AEA) through State of Alaska grants and $166,000,000 of revenue bonds. The Association and other participating utilities have entered into take-or-pay power sales agreements under which shares of the project capacity have been purchased and the participants have agreed to pay a like percentage of annual costs of the project (including ownership, operation and maintenance costs, debt service costs and amounts required to maintain established reserves). Under these take-or-pay power sales agreements, the participants have agreed to pay all project costs from the date of commercial operation even if no energy is produced. The Association has a 30.4% share of the project's capacity. The share of debt service exclusive of interest, for which the Association is responsible is approximately $47,000,000. Under a worst case scenario, the Association could be faced with annual expenditures of approximately $4.6 million as a result of its Bradley Lake 52 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements take-or-pay obligations. Management believes that such expenditures, if any, would be recoverable through the fuel surcharge ratemaking process. Upon the default of a Bradley Lake participant, and subject to certain other conditions, AEA, through Alaska Industrial Development and Export Authority, is entitled to increase each participant's share of costs pro rata, to the extent necessary to compensate for the failure of another participant to pay its share, provided that no participant's percentage share is increased by more than 25%. In December 1997, $59,485,000 of the Power Revenue Bonds, Third Series and $47,710,000 of the Power Revenue Bonds, Fourth Series were refinanced under a forward refunding arrangement. The true interest cost of the new bonds decreased to 5.611% for the Third Series bonds and 6.06% for the Fourth Series bonds from 7.295% and 7.235%, respectively. This refunding produced a Net Present Value saving to the participating utilities of approximately $8,500,000. The Association's share of these savings will be approximately $1,600,000. The following represents information with respect to Bradley Lake at June 30, 1997 (the most recent date for which information is available). The Association's share of expenses were $3,981,624 in 1997, $3,957,930 in 1996 and $4,100,154 in 1995 and are included in purchased power in the accompanying financial statements. Other electric plant in service of $6,496,812 represents the Association's share of a Bradley Lake transmission line financed internally and the Association's share of the Eklutna Hydroelectric Project, purchased in 1997. Proportionate Total share Plant in service $ 306,792,274 $ 93,264,851 Accumulated depreciation (39,645,544) (12,052,245) Interest expense 11,107,824 3,337,779 (14) Eklutna Hydroelectric Project During October 1997, the ownership of the Eklutna Hydroelectric Project formally transferred from the Alaska Power Administration to the participating utilities. This group consists of the Association along with Matanuska Electric Association (MEA) and Municipal Light and Power (ML&P). Other electric plant in service includes $1,785,900 representing the Association's share of the Eklutna Hydroelectric Plant. This balance will be amortized over the estimated life 53 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements of the facility. During the transition phase and after the transfer of ownership, Chugach, MEA and ML&P have jointly operated the facility. Each participant contributes their proportionate share for operations and maintenance costs. Under net billing arrangements, Chugach then reimburses MEA for their share of the costs. Prior to the transfer of ownership, these costs were recorded as purchased power expenses; after the transfer these costs were recorded as power production expenses. (15) Commitments and Contingencies Construction The Association is engaged in a continuous construction program. Management estimates that approximately $28,000,000 will be spent on the construction program in 1998, including approximately $4,100,000 due to use of Smaller Retirement Unit accounting methodology for generation unit major overhauls. Contingencies The Association is a participant in various legal actions, claims and unasserted claims, both for and against its interests. Management believes that the outcome of any such matters will not materially impact the Association. Standard Steel Salvage Yard Site A cost recovery action was filed in Federal District Court on December 27, 1991 by the United States against Chugach and six other Potentially Responsible Parties (PRPs) seeking reimbursement of removal and response action costs (Past Response Costs) incurred by US EPA at the Standard Steel and Metals Salvage Yard Superfund Site in Anchorage, Alaska (Site). The six other PRPs named in the action are the Alaska Railroad, Westinghouse Electric Corporation, Sears, Roebuck and Co., Montgomery Ward & Co., J.C. Penney Company, Inc. and Bridgestone/Firestone, Inc. In December, 1996, Chugach, the other named PRPs and certain federal agency PRPs (Federal PRPs) entered into a Partial Consent Decree. Under the Partial Consent Decree, Chugach and the other parties settled claims for Past Response Costs as well as investigation and other costs incurred with respect to the Site through December 1996. The Partial Consent Decree, however, did not settle Chugach's liability for future costs of designing and performing the cleanup at the Site (Future Costs). Although the Partial Consent Decree did not settle Chugach's or the other private PRPs' liability for Future Costs, the Partial Consent Decree binds the Federal PRPs and the Alaska Railroad to pay an aggregate share of 64% of Future Costs. Chugach and the five other private PRPs have reached a separate settlement to divide the remaining 36% of Future Costs among themselves. Under that settlement, Chugach's percentage share of 54 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements liability for Future Costs will equal 14.89%. The private PRPs' agreement to perform remedial design and remedial action (RD/RA) at the Site is memorialized in a new Consent Decree (RD/RA Decree) that was entered by the Federal District Court in January 1998. The RD/RA Decree contains the scope of work for the RD/RA as well as settlement terms, including EPA's covenant not to sue Chugach and the other private PRPs for Future Costs once the RD/RA is completed. The estimate of Future Costs of RD/RA at the Site, as determined by Chugach's consultants based on cost estimates contained in the FS report, ranges from $5,231,200 to $6,619,800. The RD/RA Decree contains a cost estimate, as determined by EPA and including a 50% cost overrun contingency, of $8,400,000. Chugach's share of these estimated RD/RA expenses would range from approximately $778,926 to $1,250,760. Based on recent bid documents for the remedial action, it seems unlikely that the RD/RA will cost as much as EPA's high-end estimate. These amounts are only estimates, however, and cannot be definitively known until the RD/RA work at the Site is completed in late 1998 or 1999. Under the RD/RA Decree, Chugach and the other PRPs are required to reimburse the United States for EPA oversight costs and DOJ enforcement costs relating to the RD/RA. Those costs have been estimated by the United States to equal approximately $676,000. Chugach's share of these estimated oversight and enforcement costs would equal $100,656. In addition, one of the private PRPs, Montgomery Ward, recently filed for bankruptcy protection and did not execute the RD/RA Consent Decree. As a result, Chugach will be paying an additional sum equal to Chugach's percentage share of Montgomery Ward's share of Future Costs. This additional sum is estimated to be approximately $12,600 given current estimates of Future Costs, EPA oversight costs and DOJ enforcement costs. Based on the above estimates, the total amount that may be owed by Chugach under the RD/RA Decree ranges from approximately $892,182 to $1,364,016. These amounts, particularly the projected EPA oversight costs, are only estimates and are subject to change, although, in light of recent bid documents, Chugach does not anticipate that the costs will reach the high-end estimate. In addition, the RD/RA Decree contains reservation of rights allowing EPA to seek further response actions and payments from the PRPs under certain circumstances, including for costs associated with alleged natural resource damages and no prediction can be made whether EPA will request activities through its reservation of rights under the RD/RA Decree. Four of Chugach's insurance carriers have been paying, under a reservation of rights, Chugach's costs of defense for the Site. The carriers reserved their rights regarding indemnification of Chugach for response costs. In February 1998, Chugach reached an agreement in principle with these four insurance carriers pursuant to which the carriers 55 CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements will pay the majority of Chugach's costs relating to the Site, including all Past Costs and Future Costs. This settlement preserves Chugach's potential claim for natural resource damages and is anticipated to result in Chugach paying no more that $500,000 for all Site costs. Management believes that the latter amount would be fully recoverable in rates and therefore would have no impact on Chugach's financial condition or results of operations. Regulatory Cost Charge In 1992 the State of Alaska Legislature passed legislation authorizing the Department of Revenue to collect a regulatory cost charge from utilities in order to fund the APUC. The tax is assessed on all retail consumers and is based on kilowatt hour (kWh) consumption. The Regulatory Cost Charge has decreased since its inception (November 1992) from an initial rate of $.000626 per kWh to the current rate of $.000280, effective January 1, 1998. 56 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10 - Directors and Executive Officers of the Registrant MANAGEMENT Executives Chugach operates under the direction of a Board of Directors that is elected at large by its membership. Day-to-day business and affairs are administered by the General Manager. Chugach's seven-member Board of Directors sets policy and provides direction to the General Manager. The following table sets forth certain information with respect to the executive management of Chugach: Name Age Position held Eugene N. Bjornstad 60 General Manager Lee D. Thibert 42 Executive Manager, Transmission & Distribution Network Services Evan J. Griffith, Jr. 56 Executive Manager, Finance & Energy Supply William R. Stewart 51 Executive Manager, Retail Services Eugene N. Bjornstad was appointed General Manager of Chugach June 22, 1994. Prior to that he served as Acting General Manager from March 28, 1994 until his permanent appointment. He joined Chugach in 1983 and served as Executive Manager, Operating Divisions from 1988 to 1994. Lee D. Thibert, in a reorganization on June 1, 1997, was appointed Executive Manager, Transmission and Distribution Network Services. Prior to that he was Executive Manager, Operating Divisions from June of 1994. Before moving up to the Executive Manager position, he served as Director of Operations from June 1987. Evan J. Griffith, Jr. was Executive Manager, Finance and Planning of Chugach from August 1989 to June 1997. In the June 1, 1997 reorganization he assumed the position of Executive Manager, Finance and Energy Supply. Prior to coming to Chugach, he was Budget/Program Analyst for the Anchorage Municipal Assembly from August 1984 to August 1989. 57 William R. Stewart was Executive Manager, Administration of Chugach from July 1987 to June 1, 1997 when he assumed the duty as Executive Manager, Retail Services in a reorganization of functions. He was Division Director of Administration of Chugach from January 1984 to July 1987 and Staff Assistant to the General Manager of Chugach from November 1982 to January 1984. He has been employed at Chugach since 1969. Board of Directors Pat Jasper - President. Pat Jasper, 68, is a small business owner and has been a computer programmer and systems analyst. She was originally elected to the Board in April 1995 to fill a one-year term, and served as Secretary to April 1996. She was re-elected in April 1996 and served as Vice President until April 1997 when she became President. Ed Granger - Vice President. Ed Granger, 63, is a retired professional engineer working in real estate. He was elected to the board in 1991. He resigned in March 1994, one month before his first term expired. He was reappointed to the Board to fill the remaining term of another resigned director in June 1995 and was re-elected in April 1996. He became Vice President in April 1997. Christopher Birch - Secretary. Chris Birch, 47, is a professional engineer employed by the Alaska Department of Transportation and Public Facilities. He was appointed to the Board to fill a vacated seat in October 1996 and was elected to that seat in April 1997. Mary Minder - Treasurer. Mary Minder, 58, was elected to the Board in April 1995 and served as Treasurer until April 1996 when she became Secretary. In April 1997, she was again elected Treasurer. Ms. Minder is a realtor and associate real estate broker. Elizabeth Page "Pat" Kennedy - Director. Pat Kennedy, 59, was President of Chugach from April 1994 to April 1995. Ms. Kennedy has served on the board since 1993 and was Secretary from April 1993 to April 1994. She is an attorney who has been licensed to practice law since 1976 and has been in private practice since 1990. Raymond A. "Ray" Kreig - President. Ray Kreig, 51, is president of R.A. Kreig & Associates, a consulting firm specializing in land and site assessment. He is a professional civil engineer and geologist. Mr. Kreig was elected to the board in April 1994 and was President from April 1995 to April 1997. Bruce Davison - Director. Bruce Davison, 49, was appointed to the Association's Board of Directors in June of 1997. Prior to his appointment, Mr. Davison served two years on the Chugach Electric Association Bylaws Committee. Mr. Davison is a 25-year Alaska resident and a partner in the law firm of Davison & Davison, Inc. Kathleen A. Weeks - Treasurer. Kathleen Weeks, 51, is an attorney in private practice. Her specialty is divorce, real estate and probate law. She was elected to the Board in April 1995, 58 served as Vice President from that time to April 1996 when she became Treasurer. Ms. Weeks was removed from the Board in June 1997 after the adoption of a bylaw requiring board members to physically reside - not just receive service in - Chugach's traditional service area. Item 11 - Executive Compensation CASH COMPENSATION The following table sets forth all remuneration paid by Chugach for the calendar years ended December 31, 1997, 1996 and 1995 with respect to each of the four executive officers of Chugach, all of whose total cash and cash equivalent compensation exceeded $100,000, and for all such executive officers as a group: Name Principal position Year Salary Eugene N. Bjornstad General Manager 1997 $ 164,482 1996 167,296 1995 164,924 Lee D. Thibert Executive Manager, 1997 125,626 Transmission & Distribution Network Services 1996 118,562 1995 119,312 Evan J. Griffith, Jr. Executive Manager, Finance & 1997 126,866 Energy Supply 1996 137,434 1995 126,378 William R. Stewart Executive Manager, Retail 1997 142,213 Services 1996 134,393 1995 129,738 Directors of Chugach are compensated for their services in the amount of $100 per board meeting attended (including committee meetings) up to a maximum of seventy meetings per year for a director and eighty-five meetings per year for the President. Upon termination, Mr. Bjornstad's employment agreement provides that he may receive an amount equal to his salary for the remaining term of his employment agreement (which number shall not be less than six months) plus any accrued annual leave or other compensation then due as of the effective date of the notice of termination. COMPENSATION PURSUANT TO PLANS Chugach has elected to participate in the National Rural Electric Cooperative Association 59 Retirement and Security Program (Plan), a multiple employer defined benefit master pension plan maintained and administered by the National Rural Electric Cooperative Association for the benefit of its members and their employees. The Plan is intended to be a qualified pension plan under Section 401(a) of the Code. All employees of Chugach not covered by a union agreement become participants in the Plan on the first day of the month following completion of one year of eligibility service. An employee is credited with one year of eligibility service if he completes 1,000 hours of service either in his first twelve consecutive months of employment or in any calendar year for Chugach or certain other employers in rural electrification (related employers). Pension benefits vest at the rate of 10% for each of the first four years of vesting service and become fully vested and nonforfeitable on the earlier of the date a participant has five years of vesting service or the date the participant attains age fifty-five while employed by Chugach or a related employer. A participant is credited with one year of vesting service for each calendar year in which he performs at least one hour of service for Chugach or a related employer. Pension benefits are generally paid upon the participant's retirement or death. A participant may also elect to receive pension benefits while still employed by Chugach if he has reached his normal retirement date by completing thirty years of benefit service (as hereinafter defined) or, if earlier, by attaining age sixty-two. A participant may elect to receive actuarially reduced early retirement pension benefits before his normal retirement date provided he has attained age fifty-five. Pension benefits paid in normal form are paid monthly for the remaining lifetime of the participant. Unless an actuarially equivalent optional form of benefit payment to the participant is elected, upon the death of a participant the participant's surviving spouse will receive pension benefits for life equal to 50% of the participant's benefit. The annual amount of a participant's pension benefit and the resulting monthly payments the participant receives under the normal form of payment are based on the number of his years of participation in the Plan (benefit service) and the highest five-year average of the annual rate of his base salary during the last ten years of his participation in the Plan (final average salary). Annual compensation in excess of $200,000, as adjusted by the Internal Revenue Service for cost of living increases, is disregarded after January 1, 1989. The participant's annual pension benefit at his normal retirement date is equal to the product of his years of benefit service (up to thirty) times final average salary times 2%. The following table sets forth the estimated annual pension benefit payable at normal retirement date for participants in the specified final average salary and years of benefit service categories: Final Years of benefit service Average Salary 15 20 25 30 35 -- -- -- -- -- $ 125,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 75,000 150,000 45,000 60,000 75,000 90,000 90,000 60 The annual pension benefits indicated above are the joint and surviving spouse life annuity amounts payable by the Plan, and they are not subject to any deduction for Social Security or other offset amounts. Benefit service as of December 31, 1997 taken into account under the Plan for the executive officers is shown below. Base salary for 1997 taken into account under the Plan for purposes of determining final average salary is also included. Benefit Covered Name Principal Position Service Compensation Eugene N. Bjornstad General Manager 13.7 $ 156,021 Lee D. Thibert Executive Manager, T&D 9.7 122,242 Network Services Evan J. Griffith, Jr. Executive Manager, 7.4 123,968 Finance & Energy Supply William R. Stewart Executive Manager, Retail 27.9 123,968 Services 61 Item 12 - Security Ownership of Certain Beneficial Owners and Management Not Applicable Item 13 - Certain Relationships and Related Transactions Not Applicable PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K Page Financial Statements Included in Part IV of this Report: Independent Auditors' Report 34 Balance Sheets, December 31, 1997 and 1996 35 Statements of Revenues, Expenses and Patronage Capital, Years ended December 31, 1997, 1996 and 1995 37 Statements of Cash Flows, Years ended December 31, 1997, 1996 and 1995 38 Notes to Financial Statements 39-56 Financial Statement Schedules Included in Part IV of this Report: Independent Auditors' Report 63 Schedule II - Valuation and Qualifying Accounts, Years ended December 31, 1997, 1996 and 1995 64 Other schedules are omitted as they are not required or are not applicable, or the required information is shown in the applicable financial statements or notes thereto. 62 Independent Auditors' Report The Board of Directors Chugach Electric Association, Inc.: Under the date of February 20, 1998, we reported on the balance sheets of Chugach Electric Association, Inc. as of December 31, 1997 and 1996 and the related statements of revenues, expenses and patronage capital and cash flows for each of the years in the three-year period ended December 31, 1997 which are included in Part II of the Company's Annual Report on Form 10-K. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement schedule listed in the index to Item 14 of the Company's 1997 Annual Report on Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion such schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Anchorage, Alaska /s/ KPMG Peat Marwick LLP February 20, 1998 63 Schedule II CHUGACH ELECTRIC ASSOCIATION, INC. Valuation and Qualifying Accounts Balance at Charged Balance beginning to costs at end of year and expenses Deductions of year Allowance for doubtful accounts: Activity for year ended: December 31, 1997 $(367,085) $(618,379) $617,435 $(368,029) December 31, 1996 (436,083) (566,844) 635,842 $(367,085) December 31, 1995 (569,769) (534,646) 668,332 (436,083) 64 EXHIBITS Listed below are the exhibits which are filed as part of this Report: Exhibit Description Page Number *3.1 Articles of Incorporation of the Registrant **3.2 Bylaws of the Registrant (as amended April 30, 1997) *4.1 Trust Indenture, dated as of September 15, 1991, between the Registrant and Security Pacific Bank Washington, N.A., Trustee (Including forms of bonds) *4.2 First Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank dated March 17, 1993 *4.3 Second Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank dated May 19, 1994 *4.4 Third Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank *4.4.1 Closing Documents dated November 30, 1994, First Mortgage Bond, CoBank Series (CoBank-1), Due March 15, 2002 pursuant to the Third Supplemental Indenture of Trust dated June 29, 1994 *4.4.2 Closing documents dated August 31, 1995 First Mortgage Bond, CoBank Series (CoBank-2), due August 31, 2005 pursuant to the Third Supplemental Indenture of Trust *4.4.3 Closing documents dated April 30, 1996 First Mortgage Bond, CoBank Series (CoBank-3), due March 15, 2022 pursuant to the Third Supplemental Indenture of Trust *4.4.4 Closing documents dated September 30, 1996 First Mortgage Bond, CoBank Series (CoBank-4), Due June 15, 2022 pursuant to the Third Supplemental Indenture of Trust 4.4.5 Closing documents dated November 26, 1997 First Mortgage Bond, CoBank Series (CoBank-5), Due June 15, 2012 pursuant to the Third Supplemental Indenture of Trust 77 Exhibit number Description Page *4.5 Fourth Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank dated March 1, 1995 *4.6 Fifth Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank dated September 6, 1995 *4.7 Sixth Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle- First National Bank dated April 3, 1996 ***4.8 Seventh Supplemental Indenture of Trust by and among Chugach Electric Association, Inc. and Seattle-First National Bank dated June 1, 1997 *10.1 Joint Use Agreement between the City of Seward and the Registrant *10.2 Wholesale Power Agreement between the City of Seward and the Registrant *10.3 Agreement for Sale of Electric Power and Energy between Homer Electric Association, Inc., Alaska Electric Generation and Transmission Association, Inc. and the Registrant *10.4 Modified Agreement for the Sale and Purchase of Electric Power and Energy between Matanuska Electric Association, Inc., Alaska Electric Generation and Transmission Association, Inc. and the Registrant *10.4.1 First Amendment to Modified Agreement for the Sale and Purchase of Electric Power and Energy dated April 5, 1989 by and among Chugach Electric Association, Inc., Matanuska Electric Association, Inc. and Alaska Electric Generation & Trans- mission Cooperative, Inc. *10.5 Agreement for the Sale and Purchase of Natural Gas between the Registrant and ARCO Alaska, Inc. *10.6 Amendment No. 1 to Agreement for the Sale and Purchase of Natural Gas between the Registrant and ARCO Alaska, Inc. *10.7 Agreement for the Sale and Purchase of Natural Gas between the Registrant and Marathon Oil Company 65 Exhibit number Description Page *10.8 Amendatory Agreement No. 1 to Agreement for the Sale and Purchase of Natural Gas between the Registrant and Marathon Oil Company *10.9 Amendatory Agreement No. 2 to Agreement for the Sale and Purchase of Natural Gas between the Registrant and Marathon Oil Company *10.10 Amendatory Agreement No. 3 to Agreement for the Sale and Purchase of Natural Gas between the Registrant and Marathon Oil Company *10.11 Letter of Understanding between the Registrant and Marathon Oil Company *10.12 Agreement for the Sale and Purchase of Natural Gas between the Registrant and Shell Western E&P Inc. *10.13 Amendatory Agreement No. 1 to the Agreement for the Sale of Natural Gas between the Registrant and Shell Western E&P Inc. *10.14 Amendment No. 2 to the Agreement for the Sale of Natural Gas between the Registrant and Shell Western E&P Inc. *10.14.1 Amendment No. 3 to the Agreement for the Sale of Natural Gas between the Registrant and Shell Western E&P Inc. *10.15 Agreement for the Sale and Purchase of Natural Gas between the Registrant and Chevron USA Inc. *10.16 Letter of Understanding to the Agreement for the Sale and Purchase of Natural Gas between the Registrant and Chevron USA Inc. *10.17 Amendment No. 2 to Agreement for the Sale and Purchase of Natural Gas between the Registrant and Chevron USA Inc. *10.18 Nonfirm Energy Agreement between the Registrant and Golden Valley Electric Association, Inc. *10.19 Alaska Intertie Agreement between Alaska Power Authority, Municipality of Anchorage, the Registrant, City of Fairbanks, Alaska Municipal Utilities System, Golden Valley Electric Association, Inc. and Alaska Electric Generation and Transmission Cooperative, Inc. 66 Exhibit number Description Page *10.20 Memorandum of Understanding Regarding Intertie Upgrades among Alaska Energy Authority, the Registrant, Golden Valley Electric Association, Inc., Homer Electric Association, Inc., Matanuska Electric Association, Inc., Municipality of Anchorage dba Municipal Light and Power, and the City of Seward d/b/a Seward Electric System *10.21 Addendum No. 1 to the Alaska Intertie Agreement-- Reserve Capacity and Operating Reserve Responsibility *10.22 Bradley Lake Agreement for the Sale and Purchase of Electric Power between the Alaska Power Authority, Golden Valley Electric Association, Inc., the Municipality of Anchorage, the City of Seward, the Alaska Electric Generation & Transmission Cooperative, Inc., Homer Electric Association, Inc., Matanuska Electric Association Inc. and the Registrant *10.23 Agreement for the Wheeling of Electric Power and for Related Services by and among the Registrant, Homer Electric Association, Inc., Golden Valley Electric Association, Inc., Matanuska Electric Association, Inc., the Municipality of Anchorage, Inc. dba Municipal Light & Power, the City of Seward dba Seward Electric System and Alaska Electric Generation and Transmission Cooperative, Inc. *10.24 Transmission Sharing Agreement by and among Homer Electric Association, Inc., the Registrant, Golden Valley Electric Association, Inc., and the Municipality of Anchorage d/b/a Municipal Light and Power *10.25 Amendment to Agreement for Sale of Transmission Capability among Homer Electric Association, Inc., Alaska Electric Generation and Transmission Cooperative, Inc., the Registrant, Golden Valley Electric Association, Inc. and the Municipality of Anchorage d/b/a Municipal Light and Power *10.26 Net Billing Agreement among the Registrant, Matanuska Electric Association, Inc. and Alaska Electric Generation and Transmission Cooperative, Inc. 67 Exhibit number Description Page *10.27 Interconnection Agreement between the Registrant and Municipality of Anchorage Municipal Light and Power *10.28 Interconnection Agreement between the Registrant and Municipality of Anchorage Municipal Light and Power Addendum No. 1 *10.29 Amendment No. 1 to Interconnection Agreement between the Registrant and Municipality of Anchorage Municipal Light and Power *10.30 Agreement between the Registrant and Chevron USA, Inc. for the Sale and Purchase of Supplemental Natural Gas *10.31 Agreement between the Registrant and Shell Western E&P Inc. for the Sale and Purchase of Supplemental Natural Gas *10.32 Agreement between the Registrant and ARCO Alaska, Inc. for the Sale and Purchase of Supplemental Natural Gas *10.33 Eklutna Purchase Agreement among the Registrant, Matanuska Electric Association, Inc., Municipality of Anchorage d/b/a Municipal Light and Power and Alaska Power Administration *10.33.1 Amendment No. 1 to Eklutna Purchase Agreement among the Registrant, Matanuska Electric Association, Inc., Municipality of Anchorage d/b/a Municipal Light and Power and Alaska Power Administration *10.33.2 Eklutna Purchase Agreement Amendment No. 2 effective June 14, 1993 between Chugach, MEA, ML&P and the Alaska Power Administration *10.33.3 Eklutna Hydroelectric Project Transition Plan, by and among the Registrant; The United States of America d/b/a Alaska Power Administration, a unit of the Department of Energy; the Municipality of Anchorage d/b/a Municipal Light & Power; and Matanuska Electric Association, Inc. *10.34 University Substation 1991 Improvements Contract between the Registrant and Alcan Electrical and Engineering, Inc. Exhibit number Description Page *10.35 Camp Facilities Replacement Contract between the Registrant and Baugh Construction and Engineering Company *10.36 Lease Amendment between Standard Oil Company of California and the Registrant *10.37 Lease Amendment between Chevron USA, Inc. and the Registrant *10.38 Settlement Agreement among the Registrant, Homer Electric Association, Inc., Matanuska Electric Association, Inc., the City of Seward and Alaska Electric Generation and Transmission Cooperative, Inc. resolving G&T TIER Level, Equity Level, Capital Credits, Equity Management Plan, and Loan Covenant Disputes *10.38.1 First Amendment to "Settlement Agreement Resolving G&T TIER Level, Equity Level, Capital Credits, Equity Management Plan and Loan Covenant Disputes" in APUC Docket U-92-10 between Chugach and MEA, Homer and AEG&T dated March 1993 *10.39 Loan Agreement between the National Bank for Cooperatives (formerly Spokane Bank for Cooperatives) and the Registrant, as amended *10.40 Amendment dated September 13, 1991 to Loan Agreement between the National Bank for Cooperatives and the Registrant *10.41 Form of Commitment Letter to be entered into between the National Bank for Cooperatives and Registrant *10.42 Agreement between the Municipality of Anchorage d/b/a Anchorage Municipal Light and Power, Chugach Electric Association, Inc., Matanuska Electric Association, Inc., U.S. Fish and Wildlife Service, National Marine Fisheries Service, Alaska Energy Authority, and the State of Alaska Relative to the Eklutna and Snettisham Hydroelectric Projects *10.43 Bradley Lake Hydroelectric Agreement for the Dispatch of Electric Power and for Related Services by and among Chugach Electric Association, Inc. and the Alaska Energy Authority 68 Exhibit number Description Page *10.44 Net Billing Agreement among Chugach Electric Association, Inc. and the City of Seward *10.45 Soldotna One System Use and Dispatch Agreement by and among Alaska Electric Generation and Transmission Cooperative, Inc. and Chugach Electric Association, Inc. *10.46 Agreement for Bradley Lake Resource Scheduling between Chugach, Homer Electric Association, Inc. and the Alaska Electric Generation and Transmission Cooperative, Inc. dated September 29, 1992 *10.47 Gas Transportation Agreement between Chugach, Alaska Pipeline Company and ENSTAR Natural Gas Company dated December 7, 1992 *10.48 Daves Creek Substation Agreement between Chugach and the Alaska Energy Authority dated March 13, 1992 *10.49 Memorandum of Agreement between Chugach and AEG&T dated April 27, 1993 regarding Interest Expense Allocator *10.50 Settlement Agreement between Chugach and Intervenor Wholesale Customers in APUC Docket U-93-15 dated September 1993 regarding depreciation of submarine cables *10.52 Twenty Five Million Dollar Line of Credit Agreement and Promissory Note between Chugach and National Bank for Cooperatives *10.52.1 Amendment to Line of Credit Agreement between Chugach and National Bank for Cooperatives dated March 11, 1994 *10.52.2 Amendment to Line of Credit Agreement between Chugach and National Bank for Cooperatives and amended and restated Promissory Note (thirty-five million dollars) dated April 18, 1994 *10.52.3 Amendment to Line of Credit Agreement between Chugach and National Bank for Cooperatives (thirty-five million dollars) dated May 1, 1995 *10.52.4 Amendment to Line of Credit Agreement between Chugach and National Bank for Cooperatives (thirty-five million dollars) dated May 15, 1995 69 Exhibit number Description Page *10.53 Bill of Sale between Chugach and Cook Inlet Tug & Barge Co. for the barge SUSITNA dated March 1, 1993 *10.54 Intertie Grant Agreement between Chugach and GVEA, FMUS, ML&P, AEG&T, MEA, Homer, Seward, the State of Alaska, Department of Administration, and AIDEA dated October 26, 1993 *10.55 Grant Transfer and Delegation Agreement between Chugach and GVEA, FMUS, ML&P, AEG&T, MEA, Homer, Seward, the State of Alaska, Department of Administration, and AIDEA dated November 5, 1993 *10.56 Letter of Understanding between Chugach and IBEW dated January 6, 1993 regarding the Outside Plant Personnel Agreement *10.57 Letter of Understanding between Chugach and IBEW dated January 6, 1993 regarding the Office and Engineering Agreement *10.58 Letter of Understanding between Chugach and IBEW dated January 6, 1993 regarding the Generation Plant Personnel Agreement *10.59 Eklutna Power Sales Contract No. 85-79AP10004 between Chugach and Alaska Power Administration dated October 13, 1979 *10.59.1 Contract Modification No. 1 to Contract No 85-79AP10004 between Chugach and the Alaska Power Administration dated October 19, 1988 extending the Eklutna Power Sales Agreement *10.59.2 Amendment to Exhibit E of Modification No. 1 to Contract No. 85-79AP10004 between Chugach and Alaska Power Administration dated October 29, 1993 regarding the Eklutna Power Sales Agreement *10.59.3 Contract Modification No. 2 to Contract No. 85-79AP10004 between Chugach and the Alaska Power Administration dated November 9, 1993 extending the Eklutna Power Sales Agreement *10.60 Employment Agreement by and among Chugach Electric Association, Inc. and Eugene N. Bjornstad dated July 6, 1994 Exhibit number Description Page *10.61 United States Department of Energy, Alaska Power Administration, Eklutna Project, Contract No. DE-SC85-95AP10042 for Electric Service to Chugach Electric Association, Inc., Matanuska Electric Association, Inc. and Municipality of Anchorage dba Municipal Light & Power dated December 29, 1994 *10.62 Hotel Employees & Restaurant Employees Union agreement covering terms and conditions of employment - Beluga Power Plant Culinary Employees dated the 2nd day of March, 1995 ***10.63 National Bank for Cooperatives (CoBank) Credit Agreement dated June 22, 1994 ***10.63.1 Amendment No. 1 to National Bank for Cooperatives (CoBank) Credit Agreement dated June 1, 1997 10.64 Eklutna Hydroelectric Project Closing Documents dated October 2, 1997 96 10.65 Fifty Million Dollar Line of Credit Agreement between Chugach and the National Rural Utilities Cooperative Finance Corporation executed October 22, 1997 215 12.1 N/A *19.0 Administrative Order on Consent for Remedial Investigation/Feasibility Study between Chugach and the United States Environmental Protection Agency dated September 23, 1992 *19.1 Proposed Partial Consent Decree in Standard Steel Superfund Site matter *19.2 Partial Consent Decree in Standard Steel Superfund Site matter 27 Financial Data Schedule (filed electronically) * Previously referred to in the Registrant's Annual Report on Form 10-K dated December 31, 1996. ** Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1997. *** Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q dated September 30, 1997. REPORTS ON FORM 8-K The Company was not required to file any report on Form 8-K for the year ended December 31, 1997. 70 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 1998. CHUGACH ELECTRIC ASSOCIATION, INC. By: /s/ Eugene N. Bjornstad Eugene N. Bjornstad, General Manager Date: March 30, 1998 71 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated March 30, 1998: /s/ Eugene N. Bjornstad - ----------------------------------- Eugene N. Bjornstad General Manager /s/ Lee D. Thibert - ----------------------------------- Lee D. Thibert Executive Manager, T&D Network Services /s/ Evan J. Griffith, Jr. - ----------------------------------- Evan J. Griffith, Jr. Executive Manager, Finance & Energy Supply /s/ William R. Stewart (principal financial officer) - ----------------------------------- William R. Stewart Executive Manager, Retail Services /s/ Michael R. Cunningham - ----------------------------------- Michael R. Cunningham Controller /s/ Patricia Jasper (principal accounting officer) - ----------------------------------- Patricia Jasper President and Director /s/ Ed Granger (principal executive officer) - ----------------------------------- Ed Granger Vice President and Director /s/ Christopher Birch - ----------------------------------- Christopher Birch Secretary and Director /s/ Mary Minder - ----------------------------------- Mary Minder Treasurer and Director /s/ Raymond A. Kreig - ----------------------------------- Raymond A. Kreig Director /s/ Bruce Davison - ----------------------------------- Bruce Davison Director /s/ Elizabeth P. Kennedy - ----------------------------------- Elizabeth P. Kennedy Director 72 Supplemental information to be furnished with reports filed pursuant to Section 15(d) of the Act by registrants which have not registered securities pursuant to Section 12, of the Act: Chugach has not made an Annual Report to securities holders for 1997 and will not make such a report after the filing of this Form 10-K. As a consequence, no copies of any such report will be furnished to the Securities and Exchange Commission. 73 EX-4.4.5 2 COBANK 5 - CLOSING DOCUMENTS November 24, 1997 Mr. Michael Jones, CCTS Assistant Vice President First Trust National Association 601 Union Street, Suite 2120 Seattle, WA 98101 Subject: Request for Execution and Delivery of CoBank-5 Bond Dear Mr. Jones: Enclosed are the following original documents, including attachments, in connection with the CoBank-5 bond in the amount of $15,000,000: Opinion of Counsel, Board Resolution, First Mortgage Bond, Certificate as to Bondable Additions No. 5, Available Margins Certificate, and Officers Certificate. I have also enclosed a set of these documents for your files. Please execute the bond and deliver it to the attention of John McFarlane at CoBank, P.O. Box 5110, Denver, Colorado 80217. Would you also please provide Chugach a copy of the executed bond for our files. Thank you for your assistance in this transaction. Sincerely, /s/ Evan J. Griffith, Jr. Evan J. Griffith, Jr. Executive Manager, Finance & Planning Enclosures Bond/letter First Trust National Association, as Trustee November 24, 1997 Page 1 November 24, 1997 First Trust National Association, as Trustee 601 Union Street, Suite 2120 Seattle, Washington 98101 Attention: Michael Jones, Trust Officer Re: Opinion of Counsel and Title Evidence in connection with issuance of First Mortgage Bond, CoBank Series Ladies and Gentlemen: This letter constitutes the opinion of General Counsel for Chugach Electric Association, Inc. ("Chugach") pursuant to Sections 5.01C, 5.01E, 5.02(5), 5.02(6), 5.02(7) and 5.03D of the Indenture of Trust dated as of September 15, 1991 between Chugach and First Trust National Association, successor-in-interest to Security Pacific Bank Washington, N.A., as Trustee (the "Trustee") (as amended by the First, Second, Third, Fourth, Fifth, Sixth and Seventh Supplemental Indentures thereto, dated March 17, 1993, May 19, 1994, June 29, 1994, March 1, 1995, September 6, 1995, April 3, 1996, and June 1, 1997, respectively, the "Indenture of Trust") and the terms used in this opinion shall have the meanings established therein. I have based my opinion on my review of the following records and documents associated with the issuance of a First Mortgage Bond, CoBank Series in the original principal amount of $15,000,000 Dollars (the "Bond") pursuant to the Third Supplemental Indenture of Trust dated June 29, 1994 as amended by the Seventh Supplemental Indenture of Trust dated as of June 1, 1997 (the "CoBank Supplemental Indenture"), which review is in my opinion sufficient to enable me to express an informed opinion on the matters discussed in this letter: The Bond; Indenture of Trust; Credit Agreement between Chugach and National Bank for Cooperatives (predecessor to CoBank, ACB)("CoBank") dated June 22, 1994 as amended by Amendment No. 1 to National Bank for Cooperatives Credit Agreement dated June 1, 1997; First Trust National Association, as Trustee November 24, 1997 Page 2 Board Resolution dated November 19, 1997, authorizing the issuance of a First Mortgage Bond to CoBank pursuant to the CoBank Supplemental Indenture; Officers' Certificate dated November 19, 1997, signed by the General Manager and the Executive Manager, Finance and Planning; Available Margins Certificate dated November 19, 1997; Certificate as to Bondable Additions No. 5 dated November 19, 1997; The articles of incorporation of Chugach (including all amendments thereto); and The bylaws of Chugach as in effect on the date hereof. Based on my review of the above records and my knowledge of Chugach as General Counsel, I am of the opinion that: (1) no tax, recording or filing law requirements apply to the issuance of the Bond; (2) no authorization, approval or consent by any Federal, state or other governmental regulatory agency is required for the issuance of the Bond; (3) all conditions precedent provided for in the Indenture of Trust relating to the authentication and delivery of the Bond to CoBank have been complied with; (4) the Bond, when executed by Chugach and authenticated and delivered by the Trustee and when issued by Chugach will be the legal, valid and binding obligation of Chugach enforceable in accordance with its terms and the terms of the Indenture of Trust (subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles) and entitled to the benefits of and secured by the lien of the Indenture of Trust equally and ratably with all other Outstanding Secured Bonds; (5) none of the Trust Estate is subject to any Prior Lien other than Prior Liens permitted by Section 14.06 of the Indenture of Trust; (6) no instruments, other than the Indenture of Trust, are necessary to vest in the Trustee as a part of the Trust Estate all right, title and interest of Chugach in and to all Property Additions to which the Certificate as to Bondable Additions refers; First Trust National Association, as Trustee November 24, 1997 Page 3 (7) with respect to all Property Additions to which the Certificate as to Bondable Additions refers that are located or constructed on, over or under public highways, rivers, waters or other public property, Chugach has the lawful right under permits or franchises granted by a governmental body having jurisdiction in the premises or by law to maintain and operate such Property Additions for an unlimited, indeterminate or indefinite period of time or for the period, if any, specified in such permit, franchise or law, and to remove such property at the expiration of the period covered by such permit, franchise or law, or the terms of such permit, franchise or law require any public authority having the right to take over such property to pay fair consideration therefor. (8) Chugach has corporate power to own and operate all Property Additions to which the Certificate as to Bondable Additions refers; (9) the Indenture of Trust is a lien upon all Property Additions described in the Certificate as to Bondable Additions (except such as have been Retired) free and clear of any Prior Liens except to the extent otherwise provided in Section 6.02D(2) of the Indenture of Trust; (10) the documents which have been or are herewith delivered to the Trustee conform to the requirements of the Indenture of Trust for an Application for the authentication and delivery of the Bond and, upon the basis of the Application, all conditions precedent provided for in the Indenture of Trust relating to authentication and delivery of the Bond have been complied with; and (11) Chugach has title to the Property Additions described in the Certificate as to Bondable Additions (except as have been Retired), free and clear of any Prior Liens (except to the extent otherwise permitted by the proviso to Section 6.02D(2) of the Indenture of Trust and except for Permitted Encumbrances), and Chugach has duly obtained any easements or rights-of-way which are described in the Certificate as to Bondable Additions, subject only to Permitted Encumbrances. Pursuant to the definition of "Title Evidence" contained in Section 1.01 of the Indenture of Trust, each of the foregoing opinions to the effect that Chugach has title to any portion of the Trust Estate shall be deemed to be an opinion only that Chugach has such title as in my opinion is satisfactory for the use thereof in connection with its operations and is qualified by and subject to any irregularity or deficiency in the record evidence of title which, in my opinion, can be cured by proceedings within the power of Chugach or does not substantially impair the usefulness of such property for the purposes of Chugach. This opinion is limited to the federal laws of the United States of America and the laws of the State of Alaska, and I disclaim any opinion as to the laws of any other jurisdiction. This opinion is rendered to you in connection with the issuance of the Bond and is solely for your benefit. This opinion may not be relied upon by any other person, firm, corporation or other entity First Trust National Association, as Trustee November 24, 1997 Page 4 without my prior written consent. I disclaim any obligation to advise you of any change of law that occurs, or any facts of which I become aware, after the date of this opinion. Sincerely, CHUGACH ELECTRIC ASSOCIATION, INC. /s/ Donald W. Edwards Donald W. Edwards General Counsel I:\COBNK15M.LTR Chugach Electric Association, Inc. Anchorage, Alaska RESOLUTION WHEREAS, the Board of Directors has previously approved and Chugach Electric Association, Inc. ("Chugach") has entered into a Third Supplemental Indenture of Trust dated as of June 29, 1994 between Chugach and Seattle-First National Bank ("Third Supplemental Indenture") amending and supplementing that Indenture of Trust dated as of September 15, 1991 (as heretofore amended, the "Indenture") and establishing a new series of bonds to be designated First Mortgage Bonds, CoBank Series, to be issued to Cobank, ACB (successor by merger to National Bank for Cooperatives ("CoBank") pursuant to a Credit Agreement dated June 22, 1994 from time to time to secure advances made by CoBank; WHEREAS, it is in the best interest of Chugach for the Board of Directors to authorize the issuance of a bond to CoBank under the Third Supplemental Indenture for the purpose of securing indebtedness for $15,000,000.00. NOW THEREFORE BE IT RESOLVED, that the Board of Directors hereby requests the authentication and delivery of a First Mortgage Bond, CoBank Series (designated CoBank- 5), in the principal amount of $15,000,000.00, under Sections 5.02 and 5.03 of the Indenture; BE IT FURTHER RESOLVED, that the President, Vice President, Treasurer, Secretary, General Manager and Executive Managers of Chugach, or any of them (the "Officers and Managers") are and each of them hereby is, authorized, empowered and directed, for and on behalf of Chugach, to execute and deliver, 1) the First Mortgage Bond, CoBank Series, in the amount of $15,000,000.00, to bear interest at the CoBank Fixed Rate Option in substantially the form attached hereto, and 2) any Company Request, Application, Company Order or other document or instrument that such person deems necessary or desirable in connection with the issuance of such bond; BE IT FURTHER RESOLVED, that the execution by such Officers and Managers of the said Bond, instrument or other document and the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from Chugach. CERTIFICATION I, Chris Birch, do hereby certify that I am Secretary of Chugach Electric Association, Inc., an electric non-profit cooperative membership corporation organized and existing under the laws of the State of Alaska; that the foregoing is a complete and correct copy of a resolution adopted at a meeting of the Board of Directors of this corporation, duly and properly called and held on the 19th day of November, 1997, that a quorum was present at the meeting; that the resolution is set forth in the minutes of the meeting and has not been rescinded or modified. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of this corporation this 19th day of November, 1997. (SEAL) /s/ Chris Birch Secretary THIS FIRST MORTGAGE BOND, CoBANK SERIES, HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT OR IN RELIANCE UPON AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT. Chugach Electric Association, Inc. First Mortgage Bond, CoBank Series, Due 6/15/2012 No. CoBank-5 $15,000,000.00 Chugach Electric Association, Inc., an Alaska electric cooperative (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CoBank (the "Lender"), or registered assigns, (1) the principal sum of $15,000,000.00 Dollars, (2) interest (computed on the basis of a 360 day year) thereon, from the date of issuance, at the rate or rates hereafter provided for, which interest shall be payable on each Regular Interest Payment Date with respect to the principal balance Outstanding from time to time during the calendar month most recently ended prior to such Regular Interest Payment Date, and (3) a Redemption Premium in the amounts (if any) hereinafter provided. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture described on the reverse hereof, be paid to the Person in whose name this Bond (or one or more predecessor Bonds) is registered at the close of business on the Regular Record Date (as defined below) for such interest. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may be paid to the Person in whose name this Bond (or one or more Predecessor Bonds) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Holders of Bonds of this series not less than 10 days prior to such Special Record Date. Payments of the principal of (and premium, if any) and interest on this Bond shall be made to the Holder hereof by wire transfer of immediately available funds. Wire transfers will be made to ABA #307088754 for advice to and credit of CoBank (or to such other account as the Holder hereof may designate by notice) and shall be in time to be received prior to 1:00 p.m., Alaska time, on the date each payment is due. This Bond will mature on the dates stated above. Interest only shall be due until the first Principal Payment Date. The principal amount of this Bond shall be repaid in accordance with the following amortization schedule: Date 06/15/2002 Principal Amount Due $5,000,000 Date 06/15/2007 Principal Amount Due $5,000,000 Date 06/15/2012 Principal Amount Due $5,000,000 Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this Bond to be duly executed. Dated: November 19, 1997 CHUGACH ELECTRIC ASSOCIATION, INC. ------------------------------------- Attest: /s/ Chris Birch By: /s/ Eugene N. Bjornstad Secretary Authorized Officer This Bond is one of a duly authorized issue of Bonds of the Company designated as its "First Mortgage Bonds" (herein called the "Bonds"), issued and to be issued in one or more series under, all equally and ratably secured by, an Indenture of Trust, dated as of September 15, 1991, (herein together with the First Supplemental Indenture of Trust, dated as of March 17, 1993, the Second Supplemental Indenture of Trust dated as of May 19, 1994, the Third Supplemental Indenture of Trust dated as of June 29, 1994, the Fourth Supplemental Indenture of Trust dated as of March 1, 1995, the Fifth Supplemental Indenture of Trust dated as of September 6, 1995, the Sixth Supplemental Indenture of Trust dated as of April 3, 1996, and the Seventh Supplemental Indenture of Trust dated as of June 1, 1997, called the "Indenture"), between the Company and First Trust National Association (successor-in-interest to Security Pacific Bank Washington, N.A.), as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture reference is hereby made for a statement of the description of the properties thereby mortgaged, pledged and assigned, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Bonds and of the terms upon which the Bonds are, and are to be, authenticated and delivered. This Bond is one of the series and maturity designated on the face hereof, limited in aggregate principal amount to the Maximum Amount (as defined below) at any one time outstanding. This Bond is subject to redemption at any time, upon at least twenty (20) Business Days (as hereinafter defined) notice to the Holder hereof, as a whole or in part in multiples of $1,000, at the election of the Company, at a Redemption Price equal to 100% of the principal amount being redeemed plus the Redemption Premium (as defined below), if any, with respect to the principal amount hereof being redeemed, together with accrued interest to the Redemption Date on the principal amount being redeemed, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this Bond, or one or more Predecessor Bonds, of record at the close of business on the relevant Record Dates. The Company has selected the Fixed Rate Option set forth in (B) below for an initial period of 30 days at an interest rate of 6.65 % per annum: (A) Variable Rate Option. Except as provided below, the unpaid principal balance of this CoBank Bond shall bear interest at a rate per annum equal at all times to the National Variable Rate (as hereinafter defined) plus 25 basis points. For purposes hereof, the National Variable Rate shall mean the rate of interest established by CoBank from time to time as its National Variable Rate. The National Variable Rate is intended by CoBank to be a reference rate, and CoBank may charge other borrowers rates at, above, or below that rate. Any change in the National Variable Rate shall take effect on the date established by CoBank as the effective date of such change, and CoBank agrees to notify the Company promptly after any change in the rate. (B) Fixed Rate Option. From time to time at the request of the Company, the rate of interest charged on this CoBank Bond may be fixed at a rate to be quoted by CoBank in its sole and absolute discretion. Under this option, individual amounts may be fixed for periods ranging from thirty (30) days to the life of the CoBank Bond, and the minimum aggregate principal amount of CoBank Bonds on which the interest rate may be fixed at any one time shall be $100,000. However, rates may only be fixed for periods which expire on a Business Day, and shall take into account repayments of principal in accordance with the amortization schedule. Upon the expiration of any fixed rate period, interest shall automatically accrue at the rate set forth in (A) above, unless the amount fixed is repaid or the Company fixes the rate for an additional period. Until the principal hereof is completely repaid whether by reason of maturity or redemption, interest on this Bond not theretofore paid shall be payable, in arrears, on each Interest Payment Date with respect to the principal balance outstanding from time to time during the Interest Period to which such Interest Payment date relates. Interest shall be calculated on the actual number of days this Bond is outstanding on the basis of a year consisting of 360 days. In calculating interest, the first day of each period for which interest is calculated shall be included and the day on which interest is paid shall be excluded. If prior to maturity of this Bond the Company fails to make any payment required to be made hereunder or under the terms of the Credit Agreement, then at the Holder's option in each instance, such payment shall bear interest from the date due to the date such amount is paid in full at the Default Rate (as hereafter defined). After maturity, whether by reason of acceleration or otherwise, the entire indebtedness under this Bond shall automatically bear interest at the Default Rate. All interest provided for in this provision shall be payable on demand. If an Event of Default with respect to the Bonds shall occur and be continuing, the principal of the Bonds may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of Bonds under the Indenture at any time by the Company with the consent of the Holders of a majority in aggregate principal amount of Bonds of all series at the time outstanding affected by such modification. The Indenture also contains provisions permitting the Holders of a majority in principal amount of Bonds at the time Outstanding, on behalf of the Holders of all Bonds to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Bond shall be conclusive and binding upon such Holder and upon all future Holders of this Bond and of any bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Bond. No reference herein to the Indenture and no provisions of this Bond or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Bond at the times, places and rates, and in the coin or currency, herein provided. Pursuant to Section 34.20.160 of the Alaska Statutes, notice is hereby given that the Company is personally obligated and fully liable for the amount due under this Bond and the Holder of this Bond has the right to sue on this Bond and obtain a personal judgment against the Company for satisfaction of the amount due hereunder either before or after a judicial foreclosure of the lien of the Indenture under Sections 09.45.170 through 09.45.220 of Alaska Statutes. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Bond is registrable in the Bond Register. Upon surrender of this Bond for registration of transfer at the office or agency of the company in Anchorage, Alaska, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Bond Registrar duly executed by the Holder hereof or the Holder's attorney duly authorized in writing, one or more new Bonds of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Bonds of this series are issuable only in registered form without coupons in denomination of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Bonds of this series are exchangeable for a like aggregate principal amount of Bonds of this series of a different authorized denomination, but of the same maturity and interest rate or interest rate formula, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Bond for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Bond is registered as the owner hereof for all purposes, whether or not this Bond is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. As used herein, the term: "Business Day" means any day on which CoBank and the Trustee are open for business. "CoBank" means CoBank, ACB (as successor to National Bank for Cooperatives by virtue of merger). "CoBank Bond" means a First Mortgage Bond, CoBank Series. "Credit Agreement" means that Credit Agreement secured hereby dated as of June 22, 1994, between CoBank and the Company, as the same may be amended from time to time, or such other Credit Agreement as may hereafter exist between CoBank and the Company relating to the issuance of CoBank Bonds. "Default Rate" means 4% per annum in excess of the rate or rates that would otherwise be in effect. "Interest Payment Date" with respect to any CoBank Bond means a Regular Interest Payment Date with respect to such Bond. "Interest Period" means a calendar month. "Maturity Date" with respect to this CoBank Bond means the due date set forth on the face hereof. "Maximum Amount" of CoBank Bonds means Eighty Million Dollars ($80,000,000). "National Variable Rate" shall mean the rate of interest established by CoBank from time to time as its National Variable Rate. The National Variable Rate is intended by CoBank to be a reference rate, and CoBank may charge other borrowers rates at, above, or below that rate. "Principal Payment Date" with respect to this CoBank Bond means each date on which a payment of principal is required to be made on this CoBank Bond pursuant to the amortization schedule set forth on the face hereof. "Redemption Premium" with respect to this CoBank Bond means the premium due upon the redemption or repricing of any portion of this CoBank Bond then subject to a fixed rate of interest calculated by CoBank in accordance with its methodology and equal to the present value of the difference between: (A) the amount of interest which would have accrued on such portion during the remainder of the applicable fixed rate period; less (B) the amount of interest that CoBank would earn if such portion were reinvested for the remaining fixed rate period in U.S. Treasury obligations having a weighted average life approximately equal to the remaining fixed rate period. For the purpose of calculating present value, the discount rate will be the rate of interest accruing on the U.S. Treasury obligations selected in (B) above. "Regular Interest Payment Date" with respect to this CoBank Bond means the 20th day of each calendar month. "Regular Record Date" for the payment of interest on this CoBank Bond payable, and punctually paid or duly provided for, on any Interest Payment Date means the last day (whether or not a Business Day) of the calendar month next preceding such Interest Payment Date. All other capitalized terms used in this Bond shall have the meanings assigned to them in the Indenture. TRUSTEE'S CERTIFICATE OF AUTHENTICATION FOR CoBANK BONDS This is one of the Bonds of the series designated therein referred to in the within-mentioned Indenture. FIRST TRUST NATIONAL ASSOCIATION; a national banking association, as Trustee By: /s/ Dyan M. Huhta Authorized Signatory CERTIFICATE AS TO BONDABLE ADDITIONS NO. 5 (Re Application for Authentication and Delivery of Bond CoBank-5) Pursuant to Section 5.02 of the Indenture of Trust dated as of September 15, 1991 from Chugach Electric Association, Inc. (the "Company") to Security Pacific Bank Washington, N.A., as trustee, as modified and supplemented by Supplemental Indentures No. 1, 2, 3, 4, 5, 6 and 7 thereto dated March 17, 1993, May 19, 1994, June 29, 1994, March 1, 1995, September 6, 1995, April 3, 1996 and June 1, 1997, respectively (the "Indenture"), and in connection with the Company's request for authentication and delivery of an additional Bond No. CoBank-5, the undersigned hereby make this Certificate of Bondable Additions. Capitalized terms not otherwise defined herein have the meanings assigned to them in the Indenture. (a) The balance of Bondable Additions stated in item 9 of the most recent (September 30, 1996) Summary of Certificate as to Bondable Additions heretofore filed with the Trustee as the balance of Bondable Additions to remain after the action then applied for, is $58,522,920 (item 1 in the Summary of Certificate as to Bondable Additions set forth below (the "Summary")). (b) The Amount (item 2 in the Summary) of Property Additions, not described in any previous Certificate as to Bondable Additions, acquired during the period from August 1, 1996 through September 30, 1997, is $20,802,947. Such Property Additions are described in reasonable detail on Attachment 1 hereto, and: i) have not been included in any previous Certificate as to Bondable Additions; ii) do not include Acquired Facilities or assets acquired and paid for in whole or in part through the transfer or delivery of securities or other property; and iii) are listed in Attachment 1 at Cost, which in the opinion of the undersigned is equal to their Fair Value to the Company. (c) The aggregate amount (item 3 in the Summary) of all Retirements during the period from August 1, 1996, through September 30, 1997, is $8,913,282. (d) There are no credits (item 4 of the Summary) against Retirements. (e) The excess (item 6 in the Summary) of the Amount of Property Additions shown in (b) above (item 2 of the Summary) over the net amount of Retirements (item 5 of the Summary) is $11,889,665, which is the amount of the net Bondable Additions now being certified. (f) The sum (item 7 of the Summary) of the amount shown pursuant to clause (a) above (item 1) and the net amount of Bondable Additions now being certified shown in clause (e) (item 6) above is $70,412,585. (g) The total amount (item 8 in the Summary) of Bondable Additions being used in connection with authentication and delivery of the additional Bond whose authentication and delivery are now being applied for under Section 5.02 of the Indenture is calculated as the bonds currently being applied for less the bonds repurchased in April, 1997 times 110% or ($15,000,000 - 5,000,000) x 110% = $11,000,000. (h) The balance (item 9 in the Summary) of the Bondable Additions that will remain after the granting of the Application now being made is $59,412,585. (i) With respect to the Property Additions described in this Certificate: i) such Property Additions are desirable in the conduct of the business of the Company; ii) the allocation of the Cost to the Company of such Property Additions to each account is, in the opinion of the undersigned, proper; and iii) the balance of the Bondable Additions to remain after the action applied for plus the Cost to the Company or the Fair Value to the Company, whichever is less, of uncertified Property Additions is at least equal to the aggregate amount of uncertified Retirements. (j) The allowances or charges (if any) for interest, taxes, engineering, legal expenses, superintendence, insurance, casualties and other items during construction (or in connection with the acquisition of Property Additions) which are included in the Cost to the Company of such of the Property Additions described in this Certificate as were constructed or acquired by or for the Company have been charged and are properly chargeable to fixed plant accounts in accordance with Accounting Requirements and are, in the opinion of the signers, proper in respect of the Property Additions specified; (k) No portion of the Cost to the Company of the Property Additions described in this Certificate should properly have been charged to maintenance or repairs and no expenditures are included in this Certificate which under Accounting Requirements are not properly chargeable to fixed plant accounts. (l) The terms used in this Certificate which are defined in the Indenture are used as defined in the Indenture. Summary of Certificate as to Bondable Additions No. 5 The undersigned certify the following to be a true summary of this Certificate: Start with: 1. The balance of Bondable Additions remaining after the action applied for in the previous Certificate (Certificate No. 4).................................. $58,522,920 Then take the new gross Property Additions as shown in item 2 below: 2. Amount of additional Property Additions now certified, being the Amount of all or some Property Additions in the period from August 1, 1996 through September 30, 1997 (none of which has been certified in any previous Certificate as to Bondable Additions)... $20,802,947 Then determine the deductions for Retirements by deducting item 4 below from item 3 below to produce item 5: 3. The aggregate amount of all Retirements $ 8,913,282 4. The sum of the credits against Retirements............................ $ 0 5. The net amount of Retirements to be deducted............................... $ 8,913,282 Then determine the net Bondable Additions now being certified by deducting item 5 from item 2 to produce item 6: 6. Net Bondable Additions now being certified............................. $11,889,665 Then add item 1 and item 6 to produce item 7: 7. Total Bondable additions available for the action applied for................ $70,412,585 Deduct item 8 from item 7 to produce item 9: 8. Bondable Additions now being used...... $11,000,000 9. Balance of Bondable Additions to remain after the action applied for........... $59,412,585 Dated November 19, 1997 /s/ Michael R. Cunningham Michael R. Cunningham Title: Principal Accounting Officer (Accountant) /s/ Evan J. Griffith, Jr. Evan J. Griffith, Jr. Title: Principal Financial Officer /s/ Eugene N.Bjornstad Eugene N. Bjornstad Title: General Manager (Engineer) CHUGACH ELECTRIC ASSOCIATION, INC. ATTACHMENT 1 TO CERTIFICATE AS TO BONDABLE ADDITIONS NO. 5 NET CHANGES TO ELECTRIC PLANT FOR THE PERIOD AUGUST, 1996 THROUGH SEPTEMBER, 1997 8/1/96 8/1/96 BALANCE 9/30/97 9/30/97 BALANCE ACCOUNT DESCRIPTION 8/1/96 ADDITIONS RETIREMENTS 9/30/97 - ------------------------------------------------------------------------------------------------------------------------------ PRODUCTION PLANT 31100 626 00 2101 STM - STRC & IMPR/BELUGA./OTHR/G&A. 7,349,213 0 0 7,349,213 31200 626 00 2101 STM - BLR PLT EQP/BELUGA./OTHR/G&A. 24,850,704 0 0 24,850,704 31400 626 00 2101 STM - TURBOGENR../BELUGA./OTHR/G&A. 20,716,146 0 0 20,716,146 31500 626 00 2101 STM - ACC ELEC EQ/BELUGA./OTHR/G&A. 6,932,778 0 0 6,932,778 31600 626 00 2101 STM -MISC PWR PLT/BELUGA./OTHR/G&A. 544,029 0 0 544,029 33100 621 00 2101 HYD - STRC & IMPR/GENERAL/OTHR/G&A. 690,040 0 0 690,040 33200 621 00 2101 HYD - RESV-DM-WW./GENERAL/OTHR/G&A. 5,666,600 48,652 (16,718) 5,698,534 33300 621 00 2101 HYD - WTWL-TR-GN./GENERAL/OTHR/G&A. 1,047,402 0 0 1,047,402 33400 621 00 2101 HYD - ACC ELEC EQ/GENERAL/OTHR/G&A. 371,914 0 0 371,914 33500 621 00 2101 HYD - MISC PW PLT/GENERAL/OTHR/G&A. 97,706 0 0 97,706 33600 621 00 2101 HYD - RESV-DM-WW./GENERAL/OTHR/G&A. 893,099 0 0 893,099 34000 626 00 2101 OTH - LAND&RIGHTS/BELUGA./OTHR/G&A. 422,664 0 0 422,664 34100 622 00 2101 OTH - STRC & IMPR/INTNATL/OTHR/G&A. 343,898 2,147 0 346,045 34100 624 00 2101 OTH - STRC & IMPR/BERNLKE/OTHR/G&A. 1,778,752 0 0 1,778,752 34100 626 00 2101 OTH - STRC & IMPR/BELUGA./OTHR/G&A. 20,862,174 0 0 20,862,174 34200 622 00 2101 OTH - FL HLDR-PRS/INTNATL/OTHR/G&A. 152,868 0 0 152,868 34200 624 00 2101 OTH - FL HLDR-PRS/BERNLKE/OTHR/G&A. 471,850 0 0 471,850 34200 626 00 2101 OTH - FL HLDR-PRS/BELUGA./OTHR/G&A. 3,040,258 0 0 3,040,258 34300 622 00 2101 OTH - PRIME MOVER/INTNATL/OTHR/G&A. 3,642,964 4,295 0 3,647,259 34300 624 00 2101 OTH - PRIME MOVER/BERNLKE/OTHR/G&A. 8,862,659 0 0 8,862,659 34300 626 00 2101 OTH - PRIME MOVER/BELUGA./OTHR/G&A. 48,519,882 8,262,202 (7,473,421) 49,308,663 34400 622 00 2101 OTH - GENERATORS./INTNATL/OTHR/G&A. 779,742 0 0 779,742 34400 624 00 2101 OTH - GENERATORS./BERNLKE/OTHR/G&A. 2,643,899 0 0 2,643,899 34400 626 00 2101 OTH - GENERATORS./BELUGA./OTHR/G&A. 8,941,743 0 0 8,941,743 34500 622 00 2101 OTH - ACC ELEC EQ/INTNATL/OTHR/G&A. 479,560 0 0 479,560 34500 624 00 2101 OTH - ACC ELEC EQ/BERNLKE/OTHR/G&A. 784,574 0 0 784,574 34500 626 00 2101 OTH - ACC ELEC EQ/BELUGA./OTHR/G&A. 3,660,329 808 0 3,661,137 34600 622 00 2101 OTH -MISC PWR PLT/INTNATL/OTHR/G&A. 19,465 0 0 19,465 34600 624 00 2101 OTH -MISC PWR PLT/BERNLKE/OTHR/G&A. 1,539 0 0 1,539 34600 626 00 2101 OTH -MISC PWR PLT/BELUGA./OTHR/G&A. 1,862,815 0 0 1,862,815 ============================================================= TOTAL PRODUCTION PLANT 176,431,266 8,318,104 (7,490,139) 177,259,231 ============================================================= TRANSMISSION PLANT 35000 000 00 2101 TRN - LD & LDRITS/GENERAL/OTHR/G&A. 316,165 0 138,818 454,983 35000 327 00 2101 TRN - LD & LDRITS/SUBTRANS/OTHR/G&A. 138,818 0 (138,818) 0 35200 000 00 2101 TRN - STRC & IMPR/GENERAL/OTHR/G&A. 692,856 154,775 0 847,631 35200 626 00 2101 TRN - STRC & IMPR/BELUGA./OTHR/G&A. 428,664 0 0 428,664 35300 000 00 2101 TRN - STATION EQP/GENERAL/OTHR/G&A. 31,499,053 0 15,065 31,514,118 35300 304 00 2101 TRN - STATION EQP/LDSRVMT/OTHR/G&A. 196,977 0 0 196,977 35300 626 00 2101 TRN - STATION EQP/BELUGA./OTHR/G&A. 38,649,029 0 0 38,649,029 35400 000 00 2101 TRN - TWR & FXTRS/GENERAL/OTHR/G&A. 5,378,824 0 0 5,378,824 35400 626 00 2101 TRN - TWR & FXTRS/BELUGA./OTHR/G&A. 26,890,112 0 0 26,890,112 35500 000 00 2101 TRN - POLES & FIX/GENERAL/OTHR/G&A. 8,929,826 4,217 19,008 8,953,051 35500 327 00 2101 TRN - POLES & FIX/SUBTRANS/OTHR/G&A. 32,060 0 (32,060) 0 35500 626 00 2101 TRN - POLES & FIX/BELUGA./OTHR/G&A. 1,074,661 0 0 1,074,661 35600 000 00 2101 TRN -OH CND & DVS/GENERAL/OTHR/G&A. 6,465,140 574 11,472 6,477,186 35600 327 00 2101 TRN -OH CND & DVS/SUBTRANS/OTHR/G&A. 15,750 0 (15,750) 0 35600 626 00 2101 TRN -OH CND & DVS/BELUGA./OTHR/G&A. 7,836,678 0 0 7,836,678 35700 000 00 2101 TRN - UG CONDUIT./GENERAL/OTHR/G&A. 562,221 755,117 834,897 2,152,235 35700 327 00 2101 TRN - UG CONDUIT./SUBTRANS/OTHR/G&A. 834,898 0 (834,898) 0 35700 626 00 2101 TRN - UG CONDUIT./BELUGA./OTHR/G&A. 0 0 0 0 35800 000 00 2101 TRN - UG CND & DV/GENERAL/OTHR/G&A. 3,553,187 1,435,280 1,104,802 6,093,269 35800 327 00 2101 TRN - UG CND & DV/SUBTRANS/OTHR/G&A. 1,464,557 0 (1,464,557) 0 35800 328 00 2101 TRN - UG CND & DV/NSUBCBL/OTHR/G&A. 0 0 40,700,570 40,700,570 35800 329 00 2101 TRN - UG CND & DV/SSUBCBL/OTHR/G&A. 0 0 14,295,122 14,295,122 35800 626 00 2101 TRN - UG CND & DV/BELUGA./OTHR/G&A. 54,995,692 0 (54,995,692) 0 35900 626 00 2101 TRN-RDS & TRL-BLG/BELUGA./OTHR/G&A. 4,000 0 0 4,000 ============================================================= TOTAL TRANSMISSION PLANT 189,959,168 2,349,963 (362,021) 191,947,110 ============================================================= DISTRIBUTION PLANT 36000 000 00 2101 DIS - LD & LDRITS/GENERAL/OTHR/G&A. 805,759 0 0 805,759 36100 000 00 2101 DIS - STRUC & IMP/GENERAL/OTHR/G&A. 1,817,354 0 0 1,817,354 36200 000 00 2101 DIS - STATION EQP/GENERAL/OTHR/G&A. 18,995,342 0 0 18,995,342 36400 000 00 2101 DIS - POLES-TW&FX/GENERAL/OTHR/G&A. 15,171,597 805,579 (148,850) 15,828,326 36500 000 00 2101 DIS - OH CND & DV/GENERAL/OTHR/G&A. 9,221,293 502,648 (130,761) 9,593,180 36600 000 00 2101 DIS - UG CONDUIT./GENERAL/OTHR/G&A. 7,447,667 1,756,403 (9,895) 9,194,175 36700 000 00 2101 DIS - UG CND & DV/GENERAL/OTHR/G&A. 34,517,852 1,679,753 (235,335) 35,962,270 36800 000 00 2101 DIS - LINE TRNSFR/GENERAL/OTHR/G&A. 19,024,526 1,157,648 (117,086) 20,065,088 36900 000 00 2101 DIS - SERVICES.../GENERAL/OTHR/G&A. 19,281,935 1,069,648 (69,981) 20,281,602 37000 000 00 2101 DIS - METERS...../GENERAL/OTHR/G&A. 6,727,794 369,826 (239,332) 6,858,288 37100 000 00 2101 DIS-INSTL CUS PRM/GENERAL/OTHR/G&A. 331,356 0 0 331,356 37300 000 00 2101 DIS-ST LTS & SIGN/GENERAL/OTHR/G&A. 8,030,769 64,985 (37,303) 8,058,451 ============================================================= TOTAL DISTRIBUTION PLANT 141,373,244 7,406,490 (988,543) 147,791,191 ============================================================= GENERAL PLANT 38900 000 00 2101 GEN - LD & LDRITS/GENERAL/OTHR/G&A. 122,063 5,000 0 127,063 38910 000 00 2101 GEN - LD IMPROVMT/GENERAL/OTHR/G&A. 65,097 0 0 65,097 39000 000 00 2101 GEN - STRC & IMPR/GENERAL/OTHR/G&A. 19,182,835 49,081 0 19,231,916 39000 310 00 2101 GEN - STRC & IMPR/LSHLDIM/OTHR/G&A. 198,601 0 0 198,601 39000 311 00 2101 GEN - STRC & IMPR/S&VSTRU/OTHR/G&A. 96,438 0 (6,833) 89,605 39100 000 00 2101 GEN-OFC FURN & EQ/GENERAL/OTHR/G&A. 1,869,987 101,389 (7,230) 1,964,146 39100 321 00 2101 GEN-OFC FURN & EQ/DPEQUIP/OTHR/G&A. 4,014,023 1,128,128 0 5,142,151 39200 000 00 2101 GEN - TRANSP EQMT/GENERAL/OTHR/G&A. 5,008,506 176,912 (221,097) 4,964,321 39300 000 00 2101 GEN - STORES EQMT/GENERAL/OTHR/G&A. 1,198,844 5,510 0 1,204,354 39400 000 00 2101 GEN -TL-SHP & GAR/GENERAL/OTHR/G&A. 1,307,643 44,883 0 1,352,526 39500 000 00 2101 GEN - LAB EQUIPMT/GENERAL/OTHR/G&A. 2,016,936 172,673 (52,329) 2,137,280 39600 000 00 2101 GEN - PWR OP EQMT/GENERAL/OTHR/G&A. 1,254,793 0 (2,500) 1,252,293 39600 323 00 2101 GEN - PWR OP EQMT/GENTRAN/OTHR/G&A. 804,423 0 0 804,423 39800 000 00 2101 GEN - MISC EQUIPT/GENERAL/OTHR/G&A. 1,142,215 53,265 0 1,195,480 39800 340 00 2101 GEN - MISC EQUIPT/BARGE../OTHR/G&A. 0 0 0 0 ============================================================= TOTAL GENERAL PLANT 38,282,404 1,736,841 (289,989) 39,729,256 ============================================================= COMMUNICATION PLANT 39700 000 00 2101 GEN - COMM EQUIPT/GENERAL/OTHR/G&A. 2,737,641 82,159 (1,187) 2,818,613 39700 330 00 2101 GEN - COMM EQUIPT/MICROWV/OTHR/G&A. 6,540,561 0 (5,000) 6,535,561 39700 331 00 2101 GEN - COMM EQUIPT/SCADA../OTHR/G&A. 3,012,280 8,949 0 3,021,229 39700 333 00 2101 GEN - COMM EQUIPT/TELESYS/OTHR/G&A. 311,706 1,130,618 0 1,442,324 39700 338 00 2101 GEN - COMM EQUIPT/ORSCADA/OTHR/G&A. 8,875,262 0 0 8,875,262 ============================================================= TOTAL COMMUNICATION PLANT 21,477,450 1,221,726 (6,187) 22,692,989 ============================================================= --------------- --------------- TOTAL PLANT 567,523,532 21,033,124 (9,136,879) 579,419,777 ============================================================= LESS EXCLUDABLE PLANT 39200 000 00 2101 GEN - TRANSP EQMT/GENERAL/OTHR/G&A. 5,008,506 176,912 (221,097) 4,964,321 39600 000 00 2101 GEN - PWR OP EQMT/GENERAL/OTHR/G&A. 1,254,793 0 (2,500) 1,252,293 39600 323 00 2101 GEN - PWR OP EQMT/GENTRAN/OTHR/G&A. 804,423 0 0 804,423 39800 000 00 2101 GEN - MISC EQUIPT/GENERAL/OTHR/G&A. 1,142,215 53,265 0 1,195,480 39800 340 00 2101 GEN - MISC EQUIPT/BARGE../OTHR/G&A. 0 0 0 0 ============================================================= TOTAL EXCLUDABLE PLANT 8,209,937 230,177 (223,597) 8,216,517 ============================================================= TOTAL INCLUDABLE PLANT 559,313,595 20,802,947 (8,913,282) 571,203,260 =============================================================
Chugach Electric Association, Inc. Available Margins Certificate Eugene N. Bjornstad, General Manager; Evan J. Griffith, Jr., Executive Manager, Finance and Planning (Principal Financial Officer); and Michael R. Cunningham, Controller (Principal Accounting Officer) of Chugach Electric Association, Inc. each hereby certifies that (1) the Margins for Interest for any 12 consecutive calendar months during the period of 18 calendar months immediately preceding the first day of the calendar month in which this application for authentication and delivery of Additional Bonds under Section 5.02 of the Indenture described below is made are not less than 1.20 times the Interest Charges during such 12-month period; (2) the sum of (i) Margins for Interest for any 12 consecutive calendar months during the period of 18 calendar months immediately preceding the first day of the calendar month in which this Application for authentication and delivery of additional Bonds under Section 5.02 is made and (ii) Incremental Interest with respect to such 12-month period, is not less than 1.20 times the sum of Interest Charges during such 12-month period plus Incremental Interest with respect to such 12-month period; and (3) the Margins for Interest have been calculated in accordance with the definition contained in Section 1.01 of that Indenture of Trust dated September 15, 1991 (as heretofore amended by the First, Second, Third, Fourth, Fifth, Sixth and Seventh Supplemental Indentures, thereto dated March 17, 1993, May 19, 1994, June 29, 1994 and March 1, 1995, September 6, 1995, April 3, 1996 and June 1, 1997 respectively (the "Indenture") and such calculations are set forth in the Attachment 1 hereto. Capitalized terms used herein shall have the meanings assigned to them in the Indenture. IN WITNESS WHEREOF, we have hereunto signed our names. Dated: November 19, 1997 /s/ Eugene N. Bjornstad /s/ Michael R. Cunningham Eugene N. Bjornstad Michael R. Cunningham Title: General Manager Title: Controller Principal Accounting Officer /s/ Evan J. Griffith, Jr. Evan J. Griffith, Jr. Title: Executive Manager, Finance and Energy Supply Principal Financial Officer Page 1 of 1 Available Margins CoBank 5 Plus: L-T S-T Total CoBank Bond Adjusted Adjusted 12 month Month Ending Margins Int Exp Int Exp Int Exp at 6.75% per annum Int Exp MFI/ I MFI/ I - ------------ ------- ------- ------- ------- ------------------ ------- ------- ------- March, 1996 589,008 693,932 124,422 818,354 84,375 902,729 1.6525 April, 1996 2,062,121 3,602,248 171,516 3,773,764 84,375 3,858,139 1.5345 May, 1996 -129,442 2,142,671 66,000 2,208,671 84,375 2,293,046 0.9436 June, 1996 -236,002 2,088,291 77,386 2,165,677 84,375 2,250,052 0.8951 July, 1996 -234,568 2,003,202 119,350 2,122,552 84,375 2,206,927 0.8937 August, 1996 246,318 1,999,501 119,014 2,118,515 84,375 2,202,890 1.1118 September, 1996 -24,261 1,995,770 138,181 2,133,951 84,375 2,218,326 0.9891 October, 1996 857,633 2,116,082 29,184 2,145,266 84,375 2,229,641 1.3847 November, 1996 1,648,710 2,110,203 14,353 2,124,556 84,375 2,208,931 1.7464 December, 1996 2,014,397 2,117,732 14,966 2,132,698 84,375 2,217,073 1.9086 January, 1997 2,722,367 2,120,883 14,353 2,135,236 84,375 2,219,611 2.2265 February, 1997 1,702,030 2,106,810 0 2,106,810 84,375 2,191,185 1.7768 1.4155 March, 1997 1,753,740 2,108,468 46,636 2,155,104 84,375 2,239,479 1.7831 1.4370 April, 1997 1,220,394 2,056,212 96,276 2,152,488 84,375 2,236,863 1.5456 1.4320 May, 1997 504,115 2,057,192 95,625 2,152,817 84,375 2,237,192 1.2253 1.4567 June, 1997 -4,280,093 2,051,102 69,948 2,121,050 84,375 2,205,425 -0.9407 1.3055 July, 1997 -1,354,990 2,059,097 193,733 2,252,830 84,375 2,337,205 0.4203 1.2621 August, 1997 1,001,234 2,059,085 43,905 2,102,990 84,375 2,187,365 1.4577 1.2905 September, 1997 250,242 2,052,511 55,016 2,107,527 84,375 2,191,902 1.1142 1.3011
Chugach Electric Association, Inc. Officers' Certificate Eugene N. Bjornstad, General Manager, and Evan J. Griffith, Jr., Executive Manager, Finance and Planning of Chugach Electric Association, Inc. ("Chugach") each hereby certifies that: 1) he has read the conditions and covenants and definitions related thereto in the Indenture of Trust dated as of September 15, 1991 (as heretofore amended, the "Trust Indenture"); 2) the below opinions are based on the above review and on his knowledge of Chugach in the above capacity; 3) he has, in his opinion, made such examination or investigation as is necessary to enable him to express an informed opinion as to the opinions expressed below; and 4) in accordance with Sections 5.01 B and 5.03 C of the Trust Indenture: (i) No Event of Default exists; (ii) None of the Trust Estate is subject to any Prior Lien other than Prior Liens permitted by Section 14.06 of the Trust Indenture; (iii) In his opinion, all conditions precedent provided for in the Trust Indenture relating to the authentication and delivery of the First Mortgage Bond, CoBank Series No. CoBank-5 ("CoBank-5 Bond") in the principal amount of $15,000,000.00, have been complied with; Capitalized terms not otherwise defined in this Certificate have the meanings assigned to them in the Trust Indenture. IN WITNESS WHEREOF, we have hereunto signed our names. Dated: November 19, 1997 /s/ Eugene N. Bjornstad Eugene N. Bjornstad Title: General Manager /s/ Evan J. Griffith, Jr. Evan J. Griffith, Jr. Title: Executive Manager Finance and Energy Supply Page 1 of 1 Principal Financial Officer EX-10.64 3 EKLUTNA HYDROELECTRIC PROJECT CLOSING DOCUMENTS EKLUTNA HYDROELECTRIC PROJECT Agreement for Extension of "1996 EKLUTNA HYDROELECTRIC PROJECT TRANSITION PLAN" by and among THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER; CHUGACH ELECTRIC ASSOCIATION, INC.; and MATANUSKA ELECTRIC ASSOCIATION, INC. EKLUTNA HYDROELECTRIC PROJECT Agreement for Extension of "1996 EKLUTNA HYDROELECTRIC PROJECT TRANSITION PLAN" by and among THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER; CHUGACH ELECTRIC ASSOCIATION, INC.; and MATANUSKA ELECTRIC ASSOCIATION, INC. The parties to this Agreement are the Eklutna Purchasers as defined in the 1996 Eklutna Hydroelectric Project Transition Plan (Transition Plan). The Eklutna Purchasers recognize that common interests exist regarding the ownership, operation, and maintenance of the Eklutna Project. The Eklutna Purchasers hereby extend the Transition Plan as modified by this Agreement. The Eklutna Purchasers further recognize that obligations of the Eklutna Purchasers under the terms of the Alaska Power Administration Asset Sale and Termination Act, as well as obligations of the Alaska Power Administration and successor agencies, continue beyond the Transaction Date, and that the execution of this Agreement in no way relieves the Alaska Power Administration nor any Purchaser of such continuing obligations. All capitalized terms not defined herein shall have the same meaning given them in the Transition Plan (including exhibits). Therefore, the Parties agree to extend the Transition Plan as follows: THIS Agreement for the Extension of the Transition Plan incorporates by reference the following documents and all of the rights, obligations, requirements, and provisions therein: The 1996 Transition Plan, consisting of thirteen Sections contained on ten pages; incorporating therein, specifically: Exhibit A, consisting of 33 pages; Exhibit B, consisting of 5 pages; Exhibit C, consisting of 12 pages; Exhibit D, consisting of 25 pages; and, Exhibit E, consisting of 9 pages. Eklutna Transition Plan Extension Agreement Page 1 of 5 THE Parties further agree to the following modifications with regard to the 1996 Transition Plan by this Agreement: 1. The Transition Plan will not expire upon completion of the tasks specified therein. However, the arrangements and timetable for transfer of operations, maintenance, and power marketing, as well as operation, maintenance, and administration of the Project will no longer require consultation with APA, nor will office space and access be provided for an APA real estate person after the Transaction Date. (Reference: Transition Plan Section 2 and Section 5) 2. The transfer of data and documents to the Eklutna Purchasers after the Transaction Date shall occur no later than January 1, 1998. (Reference: Transition Plan Section 7) 3. The effective date of this Agreement shall be the Transaction Date, but in any event no later than November 28, 1997. 4. The division of responsibilities among the Eklutna Purchasers after the Transaction Date will be as described in Exhibit E, Paragraph (A)(2). 5. The sixth sentence of Paragraph (A) (3) of Exhibit E is modified to delete reference to an "Ownership and Operating Agreement," and as so modified reads as follows: "Decisions of the EOC will be by double majority (a vote of two of the three Eklutna Purchasers whose shares total at least 51% of the Eklutna Project shares) unless otherwise agreed to by the Eklutna Purchasers." THE parties further agree to the following in regard to the ownership, operation, and maintenance of the Eklutna Project: 1. An Eklutna Purchaser's interest in the Eklutna Project will not be modified or changed by any assignment or transfer, except upon consent of each Eklutna Purchaser. An Eklutna Purchaser's interest may be transferred or assigned among the Eklutna Purchasers in proportion to their respective Project interest or by such other allocation as to which each Eklutna Purchaser agrees. Transfer or assignment of an Eklutna Purchaser's interest to entities other than an Eklutna Purchaser will be subject to a first right of refusal by the remaining Eklutna Purchasers, with such right to be exercised within 180 days of receipt of written notification. If no remaining Eklutna Purchaser elects to acquire such interest, the transferring Eklutna Purchaser shall indemnify the remaining Eklutna Purchasers for all expenditures which would not otherwise be required, but for which the Eklutna Project becomes obligated in meeting licensing requirements and regulations which were exempted for the original Eklutna Purchasers under the Alaska Power Administration Asset Sale and Termination Act. 2. The terms and conditions of this Agreement will apply to any successor or assign of an Eklutna Purchaser, whether such succession or assignment results from security assignment, merger, acquisition, or any other disposition by the Eklutna Purchaser of its Eklutna Project share. Eklutna Transition Plan Extension Agreement Page 2 of 5 3. Exhibits A through D of the CONTRACT FOR ELECTRIC SERVICE TO THE CHUGACH ELECTRIC ASSOCIATION, INC.; MATANUSKA ELECTRIC ASSOCIATION, INC.; AND MUNICIPALITY OF ANCHORAGE, MUNICIPAL LIGHT & POWER, Contract No. DE-SC85-95AP 1 0042 shall continue in effect until such time as revised or terminated by action of the EOC. Should any part of these Exhibits A through D conflict with the Transition Plan as modified by this Agreement, the Transition Plan shall prevail. Dated at Anchorage, Alaska this 2nd day of October 1997. Municipality of Anchorage /s/ George J. Vakalis for Larry D. Crawford Municipal Manager Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Eklutna Transition Plan Extension Agreement Page 3 of 5 The APA hereby states its non-objection to the foregoing Agreement for Extension of "1996 EKLUTNA HYDROELECTRIC PROJECT TRANSITION PLAN" Alaska Power Administration, a unit of the U.S. Department of Energy /s/ Rodney L. Adelman Rodney L. Adelman Administrator Eklutna Transition Plan Extension Agreement Page 4 of 5 RECOMMENDED: APPROVED AS TO FORM: Anchorage Municipal Light & Power MUNICIPALITY OF ANCHORAGE /s/ Hank Nikkels /s/ Mary K. Hughes Hank Nikkels Mary K. Hughes Acting General Manager Municipal Attorney RECOMMENDED: MUNICIPALITY OF ANCHORAGE /s/ George J. Vakalis George J. Vakalis Operations Manager Eklutna Transition Plan Extension Agreement Page 5 of 5 CLOSING AGREEMENT THIS AGREEMENT is made this 2nd day of October, 1997, by and between the United States of America, acting through the Alaska Power Administration, a unit of the United States Department of Energy (hereafter "United States"), and the Municipality of Anchorage, d/b/a Municipal Light and Power, Chugach Electric Association, Inc., and Matanuska Electric Association, Inc. (hereafter collectively "the Purchasers"). Recitals WHEREAS, the Purchasers executed a Memorandum of Understanding on July 25, 1989, in which Agreement at Paragraph 2 they mutually declared their respective proportionate shares of their undivided interest in the Eklutna assets. WHEREAS, on August 2, 1989, the United States and the Purchasers entered into that particular contract entitled the Eklutna Purchase Agreement, by which the United States agreed to sell and the Purchasers agreed to purchase the Eklutna Hydroelectric Project, and its real property interests, fixtures, equipment, personalty, contract and water rights, and other interests as identified in that Agreement (hereafter "Eklutna Project"). WHEREAS, by enactment of the Alaska Power Administration Asset Sale and Termination Act of 1995 (hereafter "the Sale Act), Public Law 104-58, the Congress authorized the Secretary of Energy to sell the Eklutna Project to the Purchasers in accordance with the terms of the Sale Act and the Eklutna Purchase Agreement. WHEREAS, on May 28, 1996, the United States and the Purchasers adopted the 1996 Eklutna Hydroelectric Project Transition Plan in accordance with the terms of the Eklutna Purchase Agreement for the purpose of facilitating arrangements for the transfer of ownership of the Eklutna Closing Agreement Page 1 of 12 Project to the Purchasers WHEREAS, the United States and the Purchasers are prepared at this time to complete the purchase and sale transaction contemplated by the Eklutna Purchase Agreement, the Sale Act, and the 1996 Eklutna Hydroelectric Project Transition Plan, -subject to certain continuing obligations as identified in this Agreement. Terms of Agreement NOW, THEREFORE, the United States and the Purchasers agree as follows: 1. Payment by Purchasers, The United States acknowledges receipt of the following sums paid by the Purchasers in complete and final satisfaction of the purchase-price payment requirement as provided by Section 5 of the Eklutna Purchase Agreement, Amendment No. 3 to that Agreement and Exhibit B to that Amendment: Municipality of Anchorage, d/b/a ML&P 16/30 $3,174,933. Chugach Electric Association, Inc. 9/30 $1,785,900. Matanuska Electric Association, Inc. 5/30 $ 992,167. ------- ------------ Total Received: 30/30 $5,953,000 2. Instruments Delivered. The parties acknowledge that the United States delivered on the date of this Agreement, and the Purchasers accepted on that date, the instruments identified in Appendix A to this Agreement. 3. Remaining Federal Obligations Relating to Transfer of Eklutna Project Interests to Purchasers. At the time of this Agreement, the United States is unable to convey to the Purchasers the properties or interests in the Eklutna Project identified in Appendix B to this Agreement. The United States, acting through the United States Department of Energy, will complete conveyance of Closing Agreement Page 2 of 12 the outstanding interests identified in Appendix B no later than June 1, 1998.For a period of 180 days after the date of this Agreement, the parties reserve the right to further identify, by mutual agreement, instruments and interests, if any, that should be added to Appendix B after closing and will cooperate with one another in good faith in so doing. 4. Purchasers' Operational Arrangements. The requirements of Section 10.c of the Eklutna Purchase Agreement regarding establishment of organizational, functional and staffing arrangements for operations, maintenance and Administration of the Eklutna Project are satisfied by that agreement entitled 1996 Eklutna Hydroelectric Project Transition Plan, as modified by that agreement entitled Agreement for Extension of 1996 Eklutna Hydroelectric Project Transition Plan by and among the Municipality of Anchorage, d/b/a Municipal Light & Power, Chugach Electric Association, Inc., and Matanuska Electric Association, Inc, dated October 2, 1997, which agreements are attached hereto as Appendix C. 5. Unresolved Matter. Notwithstanding the closing of the Eklutna Project sale through this Agreement, the parties acknowledge that they have not resolved the question of whether the United States is required to provide warranties of title in real property conveyance and transfer instruments issued to the Purchasers under the Sale Act and the Eklutna Purchase Agreement. The United States and the Purchasers presently have differing positions concerning this question. The warranty question is presently pending before the Comptroller General, and an opinion from that official was not received before closing of the Eklutna Project sale. Although the Comptroller General's opinion will not be binding on the Purchasers, it will provide guidance to the United States on the-unresolved question relating to warranty obligations. By entering this Agreement, neither the United States nor the Purchasers waive any position, right, claim or defense related to the question of whether the Closing Agreement Page 3 of 12 United States must provide Warranties to the Purchasers in real property transfer instruments. 6. Federal Obligations in Response to Real Property Title Defects. It is the intent of the United States to convey to the Purchasers all right, title and interest the United States has in the Eklutna Project. The parties believe that the United States is conveying sufficient right, title or interest to all real property identified in Appendix A in the Eklutna Project as constructed and used by the United States. However, in the event that the right, title or interest transferred by the United states was insufficient, at the time of transfer, the following procedures shall be employed to cure such insufficiencies: a. If after the date of this Agreement, a third party initiates any action (including without limitation an action for damages, to quiet title, or for injunctive relief) challenging any title, interest, license or right-of-way in or to real property identified in an instrument delivered by the United States to the Purchasers pursuant to the Eklutna Purchase Agreement and the Sale Act, the Purchasers shall defend, and may settle, the action in good faith, and shall provide notice of the action to the Secretary of Energy or his successor. b. If a court of competent jurisdiction enters a judgment or ruling on the merits of a case, holding or otherwise establishing that the title, interest license or right-of-way in or to real property was insufficient on the date of transfer to provide the Purchasers with the beneficial use, enjoyment and occupancy of the Eklutna Project as constructed and transferred by the United States, then the United States, in accordance with applicable law and subject to a prior appropriation by Congress for that purpose, shall acquire, for conveyance to the Eklutna Purchasers, the right, title or interest in or to real property necessary to provide the Purchasers with sufficient right, title or interest to allow for the beneficial use, enjoyment and occupancy of the Eklutna Project. Alternatively, at the Closing Agreement Page 4 of 12 election of the Purchasers, they may acquire the necessary right, title or interest and the United States,in accordance with applicable laws and subject to a prior appropriation by Congress for that purpose, shall reimburse the Purchasers for the costs of acquisition. c. Before the Purchasers settle an action described in subparagraph a of this paragraph 6, they shall notify the United States of their intent to do so and tender the defense of the action to the United States. If the United States accepts the tender, it shall defend the case to its conclusion on the merits or settle the action on terms it deems advisable. If the United States declines the tender, the Purchasers shall be free to settle the action on whatever terms they deem appropriate. If the Purchasers settle an action identified in the preceding paragraph 6.b., then the United States, in compliance with applicable laws and subject to an appropriation by the Congress for that purpose, shall reimburse the Purchasers for the payment made in settlement. d. The United States, acting through the Department of Energy or its successor, and the Purchasers may agree at any time that the right, title, interest, license or right-of-way in or to real property conveyed by an instrument identified in Appendix A to this Agreement or conveyed pursuant to paragraph 3 of this Agreement is insufficient, in which event the United States, in accordance applicable laws and subject to a prior appropriation by the Congress for that purpose, shall acquire the necessary interest and transfer it to the Purchasers or reimburse the Purchasers for the costs of such acquisition. e. In connection with the request for an appropriation to fund federal obligations under this paragraph 6, the Purchasers shall petition the Congress for reimbursement of their costs of acquiring property interests or settling claims of insufficient interest. Nothing in this Agreement shall limit the Purchasers' rights to seek an appropriation for any purpose for which they might otherwise seek Closing Agreement Page 5 of 12 an appropriation. Nothing in this Agreement obligates Congress to make any appropriations. In the event Congress fails to make an appropriation, the United States has no duties to perform any work or fund the cure of any insufficiencies. The Purchasers shall seek any appropriation from Congress pursuant to this paragraph 6. The parties reserve the right to seek judicial redress in a court of competent jurisdiction. f. In the event a court holds that a conveyance or transfer instrument was ineffective to convey or transfer to the Purchasers the right to operate the Eklutna Project, or any part thereof, and that the right, title or interest purported to have been conveyed or transferred to the Purchasers by the United States remains vested in the United States, then the Secretary of Energy or his designee hereby grants to the Purchasers, without the need for further action, a license to enable the Purchasers to continue to operate the Eklutna Project. Such license shall remain in effect until the United States is able to convey or transfer the right, title or interest, the conveyance or transfer of which was held to be ineffective pursuant to the original instrument. g. The United States' obligation to provide sufficient title extends only to the Eklutna Project as constructed and transferred by the United States. In the event that the Purchasers subsequently modify, improve or otherwise change any portion of the Eklutna Project, the United States is under no obligation to provide sufficient right, title, or interest in real property for those modifications, improvements or changes. Furthermore, in the event any right, title, or interest becomes insufficient due to a modification, improvement or any other change made to the Eklutna Project as originally constructed and transferred, then this paragraph 6 shall become inapplicable. 7. Section 17(b) Easements. Pursuant to Section 10b(3) of the Eklutna Purchase Agreement, the United States represents to the Purchasers that the instruments identified in Appendix A to this Closing Agreement Page 6 of 12 Agreement provide the Purchasers with rights in easements reserved to the United States under Section 17(b) of the Alaska Native Claims Settlement Act, 43 U.S.C. ss. 1616(b) which are sufficient for continued operation, repair and replacement of Eklutna facilities. 8. No Merger. The doctrine of merger shall not apply (a) to the rights and obligations of the parties under this Agreement, and (b) to the rights and obligations of the parties specifically relating to the sufficiency of the right, title or interest in real property transferred or to be transferred in the Eklutna Project. 9. Judicial Remedies. Nothing in this Agreement or in the conveyance or transfer instruments delivered by the United States to the Purchasers shall deprive the parties of any judicial remedy to which they may otherwise be entitled by contract or under law. 10. Correction of Errors, The parties shall cooperate with one another to correct any typographical or inadvertent errors discovered in documents or instruments issued under the Eklutna Purchase Agreement. Correction of such documents may require substitution of a new instrument in a form suitable for recordation. 11. Environmental Expenditures. Purchase orders E-97-035 E-97-036, E-97-037, and E-97- 038, issued on March 11, 1997, shall terminate on June 30, 1998, and no further requests for payment of environmental expenses will be accepted after that date, subject to the Purchase Agreement and applicable environmental law. Invoices submitted by the Purchasers before July 1, 1998 will be processed and paid. 12. Generator Rewind Contract, The United States will continue to administer Contract DE- AC-85-95AP0043 (commonly known as the Generator Rewind Contract) to a successful conclusion. The Purchasers agree to allow the United States and the Contractor under the Generator Rewind Closing Agreement Page 7 of 12 Contract access to the facilities so that the United States and the Contractor may complete work under the Contract.The Purchasers shall provide an on-site facility to the Contractor and the United States, to include office space, telephone, furniture, and the usual amenities. When the Contractor completes performance, the Contractor will issue a warranty for its work. The United States hereby assigns the Contractor's warranty to the Purchasers, effective upon the United States' receipt of the warranty. 13. Satisfaction of Conditions Precedent to Closing. All conditions precedent to transfer of the Eklutna Project to the Purchasers and to closing of the Eklutna Project sale have been satisfied or are hereby waived. 14. Notice to Parties. Notices under this Agreement or the Eklutna Purchase Agreement shall be given to the following persons: For the United States: Administrator, Alaska Power Administration, Juneau For the Purchasers: Municipality of Anchorage, d/b/a Municipal Light & Power: General Manager Chugach Electric Association, Inc.: General Manager Matanuska Electric Association, Inc.: General Manager Notices to the Purchasers shall be given to each of the Purchasers. Closing Agreement Page 8 of 12 THE UNITED STATES OF AMERICA UNITED STATES OF AMERICA Department of Energy Alaska Power Administration Date: October 2, 1997 By: /s/ Rodney L. Adelman ---------------- ---------------------- Rodney L. Adelman Administrator THE EKLUTNA PURCHASERS MUNICIPALITY OF ANCHORAGE d/b/a Municipal Power & Light Date: 2 Oct 97 By: /s/ George Vakalis for --------------------- ------------------- Larry D. Crawford Municipal Manager CHUGACH ELECTRIC ASSOCIATION, INC. Date: Oct 2. 1997 By: /s/ Eugene N. Bjornstad ------------------- ------------------------ Eugene N. Bjornstad General Manager MATANUSKA ELECTRIC ASSOCIATION, INC. Date: Oct 2, 1997 By: /s/ Wayne D. Carmony ------------------ --------------------- Wayne D. Carmony General Manager Closing Agreement Page 9 of 12 ACKNOWLEDGMENTS UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION STATE OF ALASKA ) ) ss: THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator of the Alaska Power Administration, a unit of the United States Department of Energy. /s/ Lee Anne Mackay Notary Public in and for Alaska. Residing at Anchorage My commission expires: 5/25/2000 MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER STATE OF ALASKA ) ) ss: THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, Acting Municipal Manager of the Municipality of Anchorage d/b/a Municipal Light & Power. /s/ Lee Anne Mackay Notary Public in and for Alaska. Residing at Anchorage My commission expires: 5/25/2000 Closing Agreement Page 10 of 12 CHUGACH ELECTRIC ASSOCIATION, INC STATE OF ALASKA ) ) ss: THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, General Manager of Chugach Electric Association, Inc., an Alaska electric cooperative corporation, on behalf of the corporation. /s/ Lee Anne Mackay Notary Public in and for Alaska. Residing at Anchorage My commission expires: 5/25/2000 MATANUSKA ELECTRIC ASSOCIATION, INC STATE OF ALASKA ) ) ss: THIRD JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, General Manager of Matanuska Electric Association, Inc., an Alaska electric cooperative corporation, on behalf of the corporation. /s/ Lee Anne Mackay Notary Public in and for Alaska. Residing at Anchorage My commission expires: 5/25/2000 Closing Agreement Page 11 of 12 RECOMMENDED: APPROVED AS TO FORM: ANCHORAGE MUNICIPAL LIGHT & POWER MUNICIPALITY OF ANCHORAGE /s/ Hank Nikkels /s/ Mary K. Hughes Hank Nikkels Mary K. Hughes Acting General Manager Municipal Attorney RECOMMENDED: MUNICIPALITY OF ANCHORAGE /s/ George J. Vakalis George J. Vakalis Operations Manager Closing Agreement Page 12 of 12 CLOSING AGREEMENT APPENDIX A INSTRUMENTS DELIVERED APPENDIX A 1. Bill of Sale 2. Quitclaim Deed, Palmer Substation 3. Quitclaim Deed, Reed Substation 4. Patent, Anchorage Substation (from BLM) 5. Quitclaim Deed, Anchorage Substation 6. Assignment and Transfer of Easement, Wasilla Radio Relay Site 7. Assignment and Transfer of Easement, Transmission Line (Palmer) 8. Assignment and Transfer of Easement, Transmission Line (Anchorage) 9. Assignment and Transfer of Reserved Easement, Transmission Line (Palmer 44LD513) 10. Assignment and Transfer of Reserved Easement, Transmission Line (Anchorage 44LD513) 11. Assignment and Transfer of Easement Use Rights, Transmission Line 12. Assignment and Transfer of Easement Use Rights, Aqueduct 13. Assignment and Transfer of Flowage, Flooding and Reservoir Easement 14. Decision for Assignment of BLM Right-of-Way Grant, Serial Number AA- 70133 (from BLM) 15. Assignment and Transfer of Power Project Facilities 16. Assignment and Transfer of Right-of-Way Licenses 17. Assignment and Transfer of Contract No. 85-80AP10022.000 18. Assignment and Transfer of "Cooperative Land Management Agreement Between the United States of America Through the Alaska Power Administration and the Bureau of Land Management and the State of Alaska Through the Alaska Division of Parks and Outdoor Recreation for the Management of Certain Lands in the Upper Eklutna Valley" 19. Assignment and Transfer of Agreement for Public Water Supply and Energy Generation from Eklutna Lake, Alaska, as Supplemented 20. Quitclaim Deed, Federal Reserved-Water Right Under the Eklutna Project Act of 1950,64 Stat.382, As Amended, Including State of Alaska Water Rights Certificate of Appropriation (Amended) ADL 44944 21. Assignment and Transfer of the June 3, 1957, Permit Letter; and Revocable Permit of Use Dated April 9, 1958; Regarding the Knik River Bridge 22. Assignment of Contract No. DE-SC85-95AP10042 CLOSING AGREEMENT APPENDIX B UNCONVEYED INTERESTS [None at this time.] CLOSING AGREEMENT APPENDIX C 1996 EKLUTNA HYDROELECTRIC PROJECT TRANSITION PLAN and AGREEMENT FOR EXTENSION OF 1996 EKLUTNA HYDROELECTRIC PROJECT TRANSITION PLAN Duplicate Original UNITED STATES DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION EKLUTNA PROJECT, ALASKA BILL OF SALE This BILL OF SALE is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is, 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby sells, transfers and delivers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty and obligation of the UNITED STATES in the following: THE ITEMS DESCRIBED IN EXHIBIT A ALL ITEMS ARE SOLD, TRANSFERRED AND DELIVERED AS IS. THE UNITED STATES MAKES NO WARRANTY OF ANY KIND ON ANY OF THE ITEMS BEING SOLD TRANSFERRED OR DELIVERED. The EKLUTNA PURCHASERS hereby accept all rights, titles, interests, duties and obligations in the above items. IN WITNESS THEREOF, the parties have executed this BILL OF SALE as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George J. Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Municipal Attorney EXHIBIT A The Eklutna Project Asset List was filed previously. The Eklutna Project transmission line and all associated appurtenances, equipment, and facilities are included in this Bill of Sale. Warranties, if any, which were issued to APA by third parties are conveyed to the Eklutna Purchasers. Duplicate original QUITCLAIM DEED Palmer Substation This QUITCLAIM DEED is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as the UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby RELEASES and QUITCLAIMS to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES, in a portion of the Southeast Quarter of the Northwest Quarter of Section 4, Township 17 North, Range 2 East, Seward Meridian, acquired by a Warranty Deed recorded February 16, 1952, in the official records of Palmer Recording Precinct, Third Judicial District, State of Alaska, in Book 14 at page 157, and more particularly described as follows: Beginning at a point which is situate 42.5 feet North 45000' West of center of Section 4, Township 17 North, Range 2 East, Seward Principal Meridian; thence due West for a distance of 170 feet; thence due North for a distance of 170 feet; thence due East for a distance of 169.9 feet; thence South O(degree)13' East for a distance of 170 feet to the point of ending which is the point of beginning, said parcel of land to contain 0.66 acres. Together with all equipment and associated facilities. The right, title and interest of the UNITED STATES hereby released and quitclaimed to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 IN WITNESS THEREOF, the UNITED STATES has executed this QUITCLAIM DEED as of the day and year first written above. UNITED STATES OF AMERICA Department of Energy Alaska Power Administration /s/ Rodney L. Adelman Rodney L. Adelman Administrator ACKNOWLEDGMENT STATE OF ALASKA ) ) Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (Seal) My Commission expires: 5/25/2000 Duplicate original QUITCLAIM DEED Anchorage Substation This QUITCLAIM DEED is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as the UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby RELEASES and QUITCLAIMS to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES, in the following described lands: Seward Meridian, Alaska T. 13 ., R. 3 W., Sec. 27, NE1/4NE1/4NW1/4 Together with all equipment and associated facilities. The right, title and interest of the UNITED STATES hereby released and quitclaimed to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 IN WITNESS THEREOF, the UNITED STATES has executed this QUITCLAIM DEED as of the day and year first written above. UNITED STATES OF AMERICA Department of Energy Alaska Power Administration /s/ Rodney L. Adelman Rodney L. Adelman Administrator ACKNOWLEDGMENT STATE OF ALASKA ) ) Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (Seal) My Commission expires: 5/25/2000 Duplicate original QUITCLAIM DEED Reed Substation This QUITCLAIM DEED is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as the UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby RELEASES and QUITCLAIMS to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES, in the following described property within Section 19, Township 16 North, Range 1 East, Seward Meridian, Alaska: United States Survey No. 9789. Together with all equipment and associated facilities. The right, title and interest of the UNITED STATES hereby released and quitclaimed to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 IN WITNESS THEREOF, the UNITED STATES has executed this QUITCLAIM DEED as of the day and year first written above. UNITED STATES OF AMERICA Department of Energy Alaska Power Administration /s/ Rodney L. Adelman Rodney L. Adelman Administrator ACKNOWLEDGMENT STATE OF ALASKA ) ) Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (Seal) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF EASEMENT Wasilla Radio Relay Site This ASSIGNMENT AND TRANSFER OF EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as the UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, GRANTEES, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, having acquired a communication site easement, for mutual benefits and other good and valuable consideration, hereby grants, assigns, transfers, conveys, and sets over without reservation to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES in the following described contract and grant of easement, located in the Palmer Recording District (formerly Wasilla Recording District), Third Judicial District, State of Alaska: 1. Contract and Grant of Easement dated April 7, 1955, from Ila Senske and W.M. Senske, recorded April 19, 1955, in book 11, page 252, Wasilla Recording District. Together with all right, title and interest to the associated radio and communication facilities. CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 ACKNOWLEDGMENT STATE OF ALASKA ) ) Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 The right, title and interest in and to all easement rights of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT. IN WITNESS THEREOF, the said parties-have executed this ASSIGNMENT AND TRANSFER OF EASEMENT as of the day and year first written above. Acceptance: Municipality of Anchorage dba Municipal Light and Power /s/ George J. Vakalis for Larry D. Crawford Municipal Manager Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager United States of America Department of Energy Alaska Power Administration /s/ Rodney L. Adelman Rodney L. Adelman Administrator Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF EASEMENT Eklutna Project Transmission Line (Palmer Recording District) This ASSIGNMENT AND TRANSFER OF EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, having acquired transmission line easements from various land owners, for mutual benefits and other good and valuable consideration, hereby grants, assigns, transfers, conveys, and sets over without reservation to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES in the following described contracts and grants of easements, located in the Palmer Recording District, Third Judicial District, State of Alaska: 100 Foot Right-of-Way 1. Contract and Grant of Easement dated January 29, 1954, from John L. Cope, et ux., et al., recorded April 14, 1954, in book 17, pg. 201. (within E1/2SW1/4 Section 4, T 17N, R 2E) 2. Contract and Grant of Easement dated August 6, 1953, from L.C. Stock, et ux., recorded September 16, 1953, in book 16, pg. 98. (within W1/2NE1/4 and NE1/4NW1/4 Section 9, T 17N, R 2E) 3. Contract and Grant of Easement dated April 27, 1953, from Robert Anderson, et ux., recorded August 4, 1953, in book 16, pg. 9. (within SE1/4NW1/4 Section 9, T 17N, R 2E) 4. Contract and Grant of Easement dated August 6, 1953, from Carl R. Rasmussen, et ux., recorded September 16, 1953, in book 16, pg. 96. (within NW1/4SE1/4 Section 9, T 17N, R 2E) 5. Contract and Grant of Easement dated November 300, 1951, from Clem H. Watkinson, recorded May 12, 1953, in book 15, pg. 113. (within NE1/4SW1/4 Section 9, T 17N, R 2E) 6. Contract and Grant of Easement dated October 22,, 1952, from Herbert Caulkins, et ux., recorded March 16, 1953, in book 14, pg. 235. (within SE1/4SW1/4 Section 9, T 17N, R 2E) 7. Contract and Grant of Easement dated October 25, 1951, from Ernest H. Harrington, recorded March 16, 1953, in book 14, pg. 233. (within SW1/4SE1/4 Section 9; NE1/4NW1/4 and NW1/4NE1/4 Section l6, T 17N, R 2E) 8. Contract and Grant of Easement dated October 29, 1951, from Alba S. Brooks, et ux., recorded March 16, 1953, in book 14, pg. 231. (within SW1/4NE1/4 and SE1/4NW1/4 Section 16, T 17N, R 2E) 9. Contract and Grant of Easement dated October 12, 1951, from Chester C. Liebing, et ux., recorded March 16, 1953, in book 14, pg. 229. (within NW1/4SE1/4 and NE1/4SW1/4 Section 16, T 17N, R 2E) 10. Contract and Grant of Easement dated March 26, 1953, from Robert Vanderhoff, recorded September 22, 1953, in book 16, pg. 103. (within Lot 2, and SW1/4SW1/4 and NE1/4SW1/4 Section 21, T 17N, R 2E) 75 Foot Right-of-Way 11. Contract and Grant of Easement dated April 12, 1995, from Doyle R. McCombs, et ux., recorded May 2, 1995, in book 0803, pg. 413. (within Lot 2 and 3 in the S1/2 Section 21, T 17N, R 2E) 12. Contract and Grant of Easement dated March 14, 1996, from James A. Witt, et ux., recorded May 2, 1996, in book 0846, pg. 473. (within Tract B of Lot 2 in the SE1/4 Section 21, T 17N, R 2E) 13. Contract and Grant of Easement dated October 9, 1957, from Robert V. Vanderhoff, recorded March 13, 1958, in book 25, pg. 200. (within Lot 2 and 3 in Section 21, T 17N, R 2E) 14. Contract and Grant of Easement dated October 10, 1957, from Victor G. Falk, Jr., et ux., recorded January 31, 1958, in book 25, pg. 79. (within NW1/4SW1/4 Section 22; and NE1/4SE1/4 Section 21, T 17N, R 2E) 15. Contract and Grant of Easement dated October 9, 1957, from Victor G. Falk, et ux., recorded January 31, 1958, in book 25, pg. 73. (within NW1/4SW1/4 Section 22; and NE1/4SE1/4 Section 21, T 17N, R 2E) 16. Contract and Grant of Easement dated December 11 1957, from Lauren F. Smith, et al, recorded December 11, 1957, in book 24, pg. 306. (within SE1/4SW1/4 Section 22, T 17N, R 2E) 17. Contract and Grant of Easement dated December 11, 1957, from Paul W. Nelson, et ux., recorded December 12, 1957, in book 24, pg. 317. (within NW1/4NE1/4 Section 27; and SW1/4SE1/4 Section 22, T 17N, R 2E) 18. Contract and Grant of Easement dated October 9, 1957, from Leonard Williams, et ux., recorded January 31, 1958, in book 25, pg. 67. (within NW1/4NE1/4 Section 27; and SW1/4SE1/4 Section 22, T 17N, R 2E) 19. Contract and Grant of Easement dated October 14, 1957, from Ronald J. Heddles, et ux., recorded January 31, 1958, in book 25, pg. 55. (within SW1/4NE1/4 Section 27, T 17N, R 2E) 20. Contract and Grant of Easement dated October 9, 1957, from John P. King, et ux., recorded January 31, 1958, in book 25, pg. 61. (within W1/2SE1/4 Section 27, T 17N, R 2E) 21. Contract and Grant of Easement dated October 9, 1957, from Paul W. Nelson, et ux., recorded February 19, 1958, in book 25, pg. 138. (within NW1/4SE1/4 and SW1/4NE1/4 and NW1/4NE1/4 Section 34, T 17N, R 2E) 22. Contract and Grant of Easement dated October 9, 1957, from Robert L. Burnham, et ux., recorded January 31, 1958, in book 25, pg. 49. (within SW1/4SE1/4 Section 34, T 17N, R 2E) 23. Contract and Grant of Easement dated October 10, 1957, from Francis S. Lee, recorded November 26, 1958, in book 27, pg. 42. (within Lot 1 and 2 in Section 3, T 16N, R 2E) 24. Judgment on Declaration of Taking filed December 5, 1957, from Russell Dow, et al., recorded December 4, 1959, in book Misc., pg. 112. (within Lot 2, 7, and 8 in Section 2, T 16N, R 2E) Together with the transmission line and associated facilities. 30 Foot Wide Access Easements 25. Contract and Grant of Easement dated September 17, 1996, from James A. Witt, et ux., recorded October 21, 1996, in book 0869, pg. 861. (within Lot 2, Block 1 Circle View Subdivision, Addition 3 in Section 21, T 17N, R 2E) 26. Contract and Grant of Easement dated January 29, 1997, from Noel W. Woods and Carr-Gottstein Associates, recorded March 11, 1997, in book 0885, pg. 240. (within SW1/4NE1/4 Section 16, T 17N, R 2E) The right, title and interest in and to all easement rights of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF EASEMENT as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF EASEMENT Eklutna Project Transmission Line (Anchorage Recording District) This ASSIGNMENT AND TRANSFER OF EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, having acquired transmission line easements from various land owners, for mutual benefits and other good and valuable consideration, hereby grants, assigns, transfers, conveys, and sets over without reservation to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES in the following described contracts and grants of easements, located in the Anchorage Recording District, Third Judicial District, State of Alaska: 75 Foot Right-of-Way 1. Contract and Grant of Easement dated April 17, 1952, from B.O. Rhodes, et al., recorded November 5, 1953, in vol. 98, pg. 161. (within NE1/4 Section 27, T 13N, R 3W) 2. Contract and Grant of Easement dated April 17, 1952, from Paul R. Boniface, et ux., recorded November 5, 1953, in vol. 98, pg. 171. (within N1/2NW1/4 Section 26, T 13N, R 3W) 3. Contract and Grant of Easement dated April 24, 1952, from Harold I. Moline, et al., recorded November 5, 1953, in vol. 98, pg. 166. (within N1/2NE1/4 Section 26, T 13N, R 3W) 4. Contract and Grant of Easement dated April 24, 1952, from Arnold L. Muldoon, recorded September 30, 1953, in book 97, pg. 9. (within NW1/4 Section 25, T 13N, R 3W) 5. Contract and Grant of Easement dated April 24, 1952, from K.D. Bradley, et ux., recorded September 9, 1953, in vol. 97, pg. 43. (within NE1/4 Section 25, T 13N, R 3W) 6. Contract and Grant of Easement dated October 7, 1953, from Svend A. Bragstad, et ux., recorded November 12, 1953, in vol. 98, pg. 246. (within government lot 4 and 5 in the SE1/4 Section 25; and within government lot 2 in Section 36, T 15N, R 2W) 7. Contract and Grant of Easement dated September 25, 1968, from State of Alaska, Department of Highways, recorded October 11, 1968, in Misc. Book 166, pg. 318. (within Blocks 3, 4, and 5 of Lake Ridge Terrace Subdivision, Sections 25 and 36; and Lots 137, 138, 139, 145, 146, and 147, Section 25, T 15N, R 2W) 8. Contract and Grant of Easement dated September 25, 1968, from State of Alaska, Department of Highways, recorded October 11, 1968, in Misc. Book 166, pg. 324. (within N1/2 Section 17, T 15N, R 2W) 9. Contract and Grant of Easement dated October 7, 1953, from Russell H. Oberg, et ux., recorded November 23, 1953, in vol. 99, pg. 71. (within SW1/4SE1/4 Section 4; and NW1/4NE1/4 Section 9, T 15N, R 1W) 10. Contract and Grant of Easement dated August 24, 1953, from Edward J. Goettlicher, recorded October 20, 1953, in vol. 98, pg. 57. (within SW1/4NE1/4 and NW1/4SE1/4 Section 4, T 15N, R 1W) 11. Contract and Grant of Easement dated June 18, 1953, from William E. Ramsey, et ux., recorded October 20, 1953, in vol. 98, pg. 52. (within government lot 4 in the NW1/4 Section 3; and within SE1/4NE1/4 and NE1/4SE1/4 Section 4, T 15N, R 1W) 12. Contract and Grant of Easement dated August 9, 1953, from Robert H. Stewart, et ux., recorded November 12, 1953, in vol. 98, pg. 241. (within government lot 3 in the NW1/4 Section 3, T 15N, R 1W) 13. Contract and Grant of Easement dated September 24, 1957, from Henry W. Cuffel, et ux., recorded September 30, 1957, in book E3, pg. 56. (within U.S. Survey 2491 Section 2, T 16N, R 2E) Together with the transmission line and associated facilities. The right, title and interest in and to all easement rights of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF EASEMENT as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF RESERVED EASEMENT Eklutna Project Transmission Line (Palmer Recording District) This ASSIGNMENT AND TRANSFER OF EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Project 115-kv Transmission Line as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, through the construction and operation of the Eklutna Project 115-kv Transmission Line the UNITED STATES appropriated and reserved rights to construct, operate, and maintain the transmission line and appurtenant access routes across and through the lands which were, at the time of construction, federal lands. The UNITED STATES subsequently conveyed certain of such lands by patent, subject to valid existing rights. These valid existing rights include the rights transferred herein. WHEREAS, the UNITED STATES' rights to construct, operate and maintain the Eklutna Project 115-kv transmission line and appurtenant access routes across the subject lands were reserved and excepted as easements from the patent conveyances. WHEREAS, at the inception of the project, Congress intended eventually to transfer the Eklutna Project to local public control in Alaska, pursuant to the Eklutna Project Act of 1950, 64 Stat. 382, as amended. WHEREAS, after transfer to the Eklutna Purchasers, the Eklutna Project will continue to serve the public purposes for which the UNITED STATES constructed the project. WHEREAS, pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES, acting by and through the Secretary of Energy, is authorized and directed to transfer its facilities and easement rights to the EKLUTNA PURCHASERS. NOW THEREFORE,the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest in and to all easement rights of the Alaska Power Administration which easement reserved to the UNITED STATES, to construct, operate, and maintain an electric transmission line, and associated facilities within a 75 foot wide right-of-way, including the rights necessary to operate and maintain guy wires and anchors that extend beyond 37.5 feet from the transmission line centerline, together with associated access routes, across the following described lands: Township 16 North, Range 2 East, Seward Meridian, Alaska Section 2: Lots 3 and 4. (patent 1198534) Township 17 North, Range 2 East, Seward Meridian, Alaska Section 16: That portion of the S1/2 within the Matanuska River. Section 21: That portion of the N1/2 within the Matanuska River. Together with the transmission line and associated facilities. The right, title, and interest in and to all easement rights of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT RIGHTS. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF EASEMENT as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF RESERVED EASEMENT Eklutna Project Transmission Line (Anchorage Recording District) This ASSIGNMENT AND TRANSFER OF EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Project 115-kv Transmission Line as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, through the construction and operation of the Eklutna Project 115-kv Transmission Line the UNITED STATES appropriated and reserved rights to construct, operate, and maintain the transmission line and appurtenant access roads across and through the lands which were, at the time of construction, federal lands. The UNITED STATES subsequently conveyed certain of such lands by patent, subject to valid existing rights. These valid existing rights include the rights transferred herein. WHEREAS, the UNITED STATES' rights to construct, operate and maintain the Eklutna Project 115-kv transmission line and appurtenant access routes across the subject lands were reserved and excepted as easements from the patent conveyances. WHEREAS, at the inception of the project, Congress intended eventually to transfer the Eklutna Project to local public control in Alaska, pursuant to the Eklutna Project Act of 1950, 64 Stat. 382, as amended. WHEREAS, after transfer to the Eklutna Purchasers, the Eklutna Project will continue to serve the public purposes for which the UNITED STATES constructed the project. WHEREAS, pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES, acting by and through the Secretary of Energy, is authorized and directed to transfer its facilities and easement rights to the EKLUTNA PURCHASERS. NOW THEREFORE, the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest in and to all easement rights of the Alaska Power Administration which easement reserved to the UNITED STATES, to construct, operate, and maintain an electric transmission line, and associated facilities within a 75 foot wide right-of-way between the Eklutna Power Plant and the Anchorage Substation, and a 100 foot right-of-way between the Eklutna Power Plant and the Knik River, including the rights necessary to operate and maintain guy wires and anchors that extend beyond 37.5 feet from the transmission line centerline, together with associated access routes, across the following described lands: 75 Foot Right-of -Way Township 15 North, Range 2 West, Seward Meridian, Alaska Section 25: Lots 118, 119, 120, 132, 133, 136, 137, 138, 147 and 148. (patents 50-65-0218, 1227812, 1227522, 1226892, 1234769, & 1223808) Township 15 North, Range 1 West, Seward Meridian, Alaska Section 30: Lots 44 and 54; E1/2W1/2NW1/4, E1/2NW1/4; (patent 50-79-0015) Section 19: S1/2NE1/4, SW1/4SE1/4, N1/2SE1/4; (patent 50-79-0015) Section 20: Lot 4; NW1/4NW1/4, W1/2SW1/4NW1/4; (patent 50-79-0015) Section 17: N1/2, SW1/4NW1/4SE1/4, N1/2NW1/4SE1/4, N1/2SW1/4SE1/4, N1/4SW1/4; (patent 50-79-0015) Township 15 North, Range 1 West, Seward Meridian, Alaska Section 8: Lot 185 and 216; (patents 50-79-0015, and 1227503) Section 9: S1/4SW1/4SW1/4; Lot 38, 39, 53, 54, 60, 72, 73, 85, 86, 95, 106, 107, 113, 114, 123, 124, 128, 129, 140, 142 and 143. (patents 50-79-0015, 1167063, 1228996, 1230948, 1220415, 1222725, 1220905, 1167119, 1206697, 1223819, 1226356, 1226423, 1220899, 1223815, 1227011, and 1219272) Township 16 North, Range 1 West, Seward Meridian, Alaska Section 35: N1/2N1/2, S1/2NW1/4; (patent 50-64-0101) Section 25: N1/2SE1/4, NE1/4. (patent 50-74-0164) Township 16 North, Range 1 East, Seward Meridian, Alaska Section 30: Lot 2; E1/2W1/2.. (patent 50-74-0164) Township 16 North, Range 2 East, Seward Meridian, Alaska Section 2: that portion of the E1/2E1/2 within the Knik River. 100 Foot Right-of-Way Township 16 North, Range 2 East, Seward Meridian, Alaska Section 17: E1/2, excluding patented U.S. Survey 3234 and A-016300; (MHA 059775) Section 16: All, excluding A-016300, patented U.S. Surveys 3240, 3239, and 3561; (MHA 059775) Section 9: All, excluding PLO 1394, patented U.S. Surveys 3234, 3242, 3164, 3235, 2866, 3236, 3160, 3076, 2942, 3070, 3077, 3240, 3239, and 3561, Lots 3, 4, and 5 and patented Lots 1 and 2 of U.S. Survey 3568, and A-016300; (MHA 059775) Section 10: All, excluding patented U.S. Surveys 3236, 3238, 3237 and 3363, Lots 4 and 5 of U.S. Survey 3568, A046426, A-054847 and A-058948; (MHA 059775) Section 11: All, excluding patented U.S. Survey 3363, A-057850 and A-054213; (MHA 059775) Section 2: All unsurveyed portion, excluding patented U.S. Survey 2491 and A054213; (MHA 059775) Together with the transmission line and associated facilities. The right, title, and interest in and to all easement rights of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT. IN WITNESS THEREOF, the UNITED STATES has executed this ASSIGNMENT AND TRANSFER OF EASEMENT as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS Eklutna Project Transmission Line This ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Project 115-kv Transmission Line as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, through the construction and operation of the Eklutna Project 115-kv Transmission Line the UNITED STATES appropriated and reserved the rights to construct, operate, and maintain the transmission line and appurtenant access routes across and through the lands which were, at the time of construction, federal lands. The UNITED STATES subsequently conveyed certain of such lands to Eklutna, Inc. pursuant to the Alaska Native Claims Settlement Act of December 18, 1971 as amended, 43 U.S.C. ss. 1601 et seq. ("ANCSA"), subject to valid existing rights. These valid existing rights include the rights transferred herein. WHEREAS, the UNITED STATES' rights to construct, operate and maintain the Eklutna Project 115-kv transmission line and appurtenant access routes across the subject lands were reserved and excepted as easements from the conveyance to Eklutna, Inc., pursuant to Section 17(b) of ANCSA, 43 U.S.C. ss. 1616(b). WHEREAS, at the inception of the Eklutna Project, Congress intended eventually to transfer the Eklutna Project to local public control in Alaska, pursuant to the Eklutna Project Act of 1950, 64 Stat. 382, as amended. WHEREAS, after transfer to the Eklutna Purchasers, the Eklutna Project will continue to serve the public purposes for which the UNITED STATES constructed the project. WHEREAS, pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES, acting by and through the Secretary of Energy, is authorized and directed to transfer its facilities and its use rights to the Section 17(b) easements to the EKLUTNA PURCHASERS, such easements to continue to be administered by the Department of Interior, Bureau of Land Management in accordance with their terms. NOW THEREFORE, the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest in and to all easement use rights of the Alaska Power Administration which use reserved to the UNITED STATES, pursuant to Section 17(b) of ANCSA, to construct, operate, and maintain an electric transmission line, and associated facilities within a 75 foot wide right-of-way, including the rights necessary to operate and maintain guy wires and anchors that extend beyond 37.5 feet from the transmission line centerline, together with associated access routes, across the following described lands: Township 14 North, Range 2 West, Seward Meridian, Alaska Section 2: Lot 2. (BLM EIN 56 C4, Patent No. 50-79-0657) Township 15 North, Range 2 West, Seward Meridian, Alaska Tract 40 (within Sections 35 and 36). (BLM EIN 56 C4, Patent No. 50-93-0601) (Township) 15 North. Range 1 West, Seward Meridian, Alaska Section 19: E1/2SW1/4. (BLM EIN 56 C4, Patent No. 50-93-0601) Township 16 North, Range 1 West, Seward Meridian, Alaska Section 34: SE1/4, SW1/4, NE1/4; (BLM EIN 56 C4, Patent No. 50-93-0601) Section 26: Lot 11, S1/2SE1/4; (BLM EIN 56 C4, Patent No. 50-93-0601) Section 25: SW1/4. (BLM EIN 56 C4, Patent No. 50-93-0601) Township 16 North, Range 1 East, Seward Meridian, Alas-ka Section 30: N1/2NE1/4; (BLM EIN 56 C4 and EIN 66 C8, Patent No. 50-86-0356) Section 19: W1/2SW1/4SE1/4, SE1/4W1/4SE1/4, SW1/4SE1/4SE1/4, E1/2SE1/4SE1/4, SE1/4NE1/4SE1/4; (BLM EIN 56 C4, EIN 56a C4, EIN 56b C4, EIN 66 C8 and EIN 67 C8, Patent No. 50-86-0356) Section 19: SW1/4NE1/4SE1/4, SE1/4NW1/4SE1/4, NE1/4SW1/4SE1/4, NW1/4SE1/4SE1/4; (BLM EIN 56 C4, EIN 56a C4, EIN 56b C4, EIN 66 C8 and EIN 67 C8, Interim Conveyance No. 1211) Section 20: S1/2; (BLM EIN 56 C4 and EIN 66 C8, Patent No. 50-93-0563) Section 20: S1/2NE1/4; (BLM EIN 56 C4 and EIN 66 C8, Interim Conveyance No. 1512) Section 21: S1/2E1/4; (BLM EIN 56 C4 and EIN 66 C8, Patent No. 50-93-0563) Section 21: NW1/4, N1/2NE1/4; (BLM EIN 56 C4 and EIN 66 C8, Interim Conveyance No. 1512) Section 22: NE1/4, NE1/4NW1/4; (BLM EIN 56 C4 and EIN 66 CB, Patent No. 50-93-0563) Section 22: NW1/4NW1/4; (BLM EIN 56 C4 and EIN 66 CB, Interim Conveyance No. 1512) Section 23: N1/2 (BLM EIN 56 C4 and EIN 66 CB, Patent No. 50-93-0563) Section 24: N1/2; (BLM EIN 56 C4 and EIN 66 CB, Patent No. 50-93-0563) Section 13: S1/2S1/2. (BLM EIN 56 C4 and EIN 66 CB, Patent No. 50-93-0601) Township 16 North, Range 2 East, Seward Meridian, Alaska Section 18: Lot 16; (BLM EIN 56 C4 and EIN 66 CB, Patent No. 50-93-0601) Section 17: NW1/4, E1/2NW1/4SW1/4, E1/2SW1/4. (BLM EIN 64 C4, Patent No. 50-86-0636) Together with the transmission line and associated facilities. The right, title, and interest in and to all easement use rights of the Alaska Power Administration, which use was reserved to the UNITED STATES pursuant to Section 17(b) of ANCSA, is hereby granted to the EKLUTNA PURCHASERS and vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS. IN WITNESS WHEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS Eklutna Lake to Eklutna Power Plant Aqueduct This ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Lake to Eklutna Power Plant Aqueduct as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, through the construction and operation of the Eklutna Lake to Eklutna Power Plant Aqueduct the UNITED STATES appropriated and reserved the rights to construct, operate, and maintain the tunnel aqueduct and appurtenant access routes across and through lands which were, at the time of construction, withdrawn from entry or disposition under the public land laws. The UNITED STATES subsequently conveyed certain of such lands to Eklutna, Inc. pursuant to the Alaska Native Claims Settlement Act of December 18, 1971 as amended, 43 U.S.C. ss. 1601 et seq. ("ANCSA"), subject to valid existing rights. These valid existing rights include the rights transferred herein. WHEREAS, the UNITED STATES' rights to construct, operate and maintain the tunnel aqueduct and appurtenant access routes across the subject lands were reserved and excepted as easements from the conveyance to Eklutna, Inc., as 100 foot wide easements pursuant to Section 17(b) of ANCSA, 43 U.S.C. ss. 1616(b). WHEREAS, at the inception of the Eklutna Project, Congress intended eventually to transfer the Eklutna Project to local public control in Alaska, pursuant to the Eklutna Project Act of 1950, 64 Stat. 382, as amended. WHEREAS, after transfer to the Eklutna Purchasers, the Eklutna Project will continue to serve the public purposes for which the UNITED STATES constructed the project. WHEREAS, pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES, acting by and through the Secretary of Energy, is authorized and directed to transfer its facilities and its use rights to the Section 17(b) easements to the EKLUTNA PURCHASERS, such easements to continue to be administered by the Department of Interior, Bureau of Land Management in accordance with their terms. NOW THEREFORE, the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest in and to all easement use rights of the Alaska Power Administration which use reserved to the UNITED STATES, pursuant to Section 17(b) of ANCSA, to construct, operate, and maintain an aqueduct tunnel and associated facilities within a 100 foot wide right-of-way, together with associated access routes, across the following described lands: Township 6 North, Range 2 East, Seward Meridian, Alaska Section 20: W1/2. (BLM EIN 65 C4, patent No. 50-86-0636) Township 15 North, Range 2 East, Seward Meridian, Alaska Section 5: Lot 2; S1/2N1/2, S1/2. (BLM EIN 65 C4, patent No. 50-86-0636) Section 8: Lot 12; NW1/4NW1/4. (BLM EIN 65 C4, patent No. 50-86-0636) Together with the aqueduct tunnel and associated facilities. The right, title, and interest in and to all easement use rights of the Alaska Power Administration, which use was reserved to the UNITED STATES pursuant to Section 17(b) of ANCSA, is hereby granted to the EKLUTNA PURCHASERS and vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF EASEMENT USE RIGHTS as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF FLOWAGE, FLOODING, AND RESERVOIR EASEMENT EKLUTNA HYDROELECTRIC PROJECT EKLUTNA LAKE, ALASKA This ASSIGNMENT AND TRANSFER OF FLOWAGE, FLOODING AND RESERVOIR EASEMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 911 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Project 115-kv Transmission Line as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, the UNITED STATES reserved public lands and waters sufficient to support the Eklutna Project, specifically the Eklutna Project Act of 1950, 64 Stat. 382, as amended, Public Land Order (PLO) 4022 dated May 20, 1966 (for lands and waters in and adjacent to Eklutna Lake) and Section 24 of the Federal Power Act (FPA) of June 10, 1928, 41 Stat. 1075, providing for the rights to operate and maintain a flowage, flooding and reservoir easement. Portions of the lands upland of the Eklutna Lake mean high water mark have subsequently been conveyed by the UNITED STATES to Eklutna, Inc., pursuant to the Alaska Native Claims Settlement Act of December 18, 1971, as amended, 43 U.S.C. ss. 1601 et seq., subject to valid existing rights. The UNITED STATES has prior existing valid rights to the existing flowage, flooding and reservoir easement to ensure the safe operation of the Eklutna Project as provided in the Eklutna Project Act of 1950, 64 Stat. 382, as amended, PLO 4022 and Section 24 of the FPA. WHEREAS, at the inception of the Eklutna Project, Congress intended eventually to transfer the Eklutna Project to local public control in Alaska, pursuant to the Eklutna Project Act of 1950, 64 Stat. 382, as amended. WHEREAS, after transfer to the Eklutna Purchasers, the Eklutna Project will continue to serve the public purposes for which the UNITED STATES constructed the project. WHEREAS, pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES, acting by and through the Secretary of Energy, is authorized and directed to transfer its facilities and its real property interests to the EKLUTNA PURCHASERS. NOW THEREFORE, the UNITED STATES, for mutual benefits and other good and valuable considerations, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES in an existing flowage, flooding and reservoir easement. The flowage and flooding easement is within the following described lands: T. 15 N., R. 2 E., Seward Meridian, Alaska Section 8: Portion of Lots 1, 2, 4, 5, 6, 7, 8, 9, 10, 11, and 13. (Patent 50-86-0636; and PLO 589 and 4022) Section 9: Portion of Lots 1 through 6, inclusive. (Patent 50-86-0636; Interim Conveyance 1573) Section 10: Portion of Lots 1, and 2; (Interim Conveyance 1573) Section 14: Portion of Lots 1, and 2; (Interim Conveyance 1573) Section 15: Portion of Lots 1, 2, and 3; (Interim Conveyance 1573) Section 16: Portion of Lots 1, and 2; (Interim Conveyance 1573) Section 22: Portion of Lots 1, and 2; (Interim Conveyance 1573) Section 23: Portion of Lots 1, 2, and 3; (Interim Conveyance 1573) Section 24: Portion of Lots 1, and 2; (Interim Conveyance 1573) Section 25: Portion of Lots 1, 2, 3, and 4; (Interim Conveyance 1573) Section 26: Portion of Lots 1, 2, and 3; (Interim Conveyance 1573) Section 36: Portion of Lots 1, 2, 3, and 4; (Interim Conveyance 1573) T. 15 N., R. 3 E., Seward Meridian, Alaska Section 30: Portion of Lots 1, and 2; (Patent 50-93-0565) Section 31: Portion of Lots 1, and 2; (Patent 50-93-0565) T. 14 N., R. 2 E., Seward Meridian. Alaska Section 1: Portion of N1/2N1/2NE1/4; (Patent 50-93-0565) Comprising 391.60 acres, more or less. The reservoir easement is comprised of and underlies that body of water known as Eklutna Lake. The right, title, and interest of the UNITED STATES hereby granted to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF FLOWAGE, FLOODING AND RESERVOIR EASEMENT. IN WITNESS WHEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF FLOWAGE, FLOODING AND RESERVOIR EASEMENT as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF POWER PROJECT FACILITIES Eklutna Project This ASSIGNMENT AND TRANSFER OF POWER PROJECT FACILITIES is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, as grantor acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801- 8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., GRANTEES, collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WHEREAS, the UNITED STATES has constructed, operated and maintained the Eklutna Hydroelectric Project ("Eklutna Project") and the Eklutna Project 115-kv Transmission Line as a part thereof, under the authority of the Eklutna Project Act of 1950, 64 Stat. 382, as amended, (I) to encourage and promote economic development; (ii) to foster the establishment of essential industries; and (iii) to further the self- sufficiency of national defense. WHEREAS, on September 15, 1997, the Bureau of Land Management issued Right-of-Way Grant, Serial Number AA-70133, to the UNITED STATES to construct, operate, maintain and terminate a right-of-way for the Eklutna Hydroelectric Power Project, including: Eklutna Dam and spillway, Eklutna Lake intake; power facilities above and underground between Eklutna Lake and the Old Glenn Highway: power tunnel, gate valve, adit, and surge tank; facilities located near the Old Glenn Highway; administrative, maintenance, and support facilities, power house, tailrace, storage yard, warehouse, garage, and parking area; overhead 115KV electric power transmission lines to Anchorage and Palmer, including guy wires, anchors, tap switches, and other power facilities associated with the transmission lines; and related access roads across lands under the administration of the Bureau of Land Management. WHEREAS, it is the intent of the UNITED STATES to assign and transfer all power facilities and equipment across the lands described in Right-of-Way Grant, Serial Number AA-70133 to the EKLUTNA PURCHASERS. NOW THEREFORE, the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns, transfers, and sets over without reservation to the EKLUTNA PURCHASERS, their successors and assigns, as tenants in common according to their fractional interests as more particularly set forth herein,. all right, title, and interest in the power facilities and equipment across the lands described in Right-of-Way Grant, Serial Number AA-70133. Said lands are also described in Exhibit A, attached hereto and made a part hereof. The right, title, and interest in and to power facilities and equipment of the Alaska Power Administration is hereby granted to the EKLUTNA PURCHASERS and vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 The EKLUTNA PURCHASERS hereby accept the ASSIGNMENT AND TRANSFER OF POWER PROJECT FACILITIES. IN WITNESS WHEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF POWER PROJECT FACILITIES as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by George J. Vakalis, the Acting Municipal Manager of the Municipality of Anchorage, doing business as Municipal Light and Power, on behalf of said municipal corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Eugene N. Bjornstad, the General Manager of Chugach Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 CORPORATE ACKNOWLEDGMENT State of Alaska ) ) ss. Third Judicial District ) The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Wayne D. Carmony, the General Manager of Matanuska Electric Association, Inc., on behalf of said corporation. /s/ Lee Anne Mackay Notary Public (SEAL) My Commission expires: 5/25/2000 EXHIBIT A Legal Description for Right-of-Way AA-70133 The Eklutna transmission lines and access road are shown on the as-built survey of the Eklutna Transmission Line, Alaska Power Administration Drawing No. 783-908-449, certified by Mark E. Davis on November 14, 1996. This survey is referred to below as "the as-built survey". Distances and acreage shown below are approximate and are based on estimated distances within each section on the as-built survey. The centerline of the right-of-way follows the transmission line. It is 75 feet wide except for guy wires and anchors at transmission line angle points that extend beyond 37.5 feet from the centerline and 30 foot wide access roads that extend beyond 37.5 feet from the centerline. The power plant and dam sites are not linear. Seward Meridian, Alaska T. 15 N., R. 2 E.. (surveyed) Sec. 7, E1/2SE1/4NE1/4, E1/2NE1/4SE1/4 (40 acres); Sec. 8, Lot 1 (31.91 acres); Lot 2 (32.47 acres); Lot 4 (39.79 acres); Lot 5 (14.99 acres); Lot 7 (10.92 acres); Lot 8 (39.99 acres); Lot 13 (19.99 acres); Containing approximately 230.06 acres. T. 16 N., R. 2 E.. (surveyed) Sec. 11, Lot 1. that portion occupied by 1,200 feet of the transmission line within the NW 1/4NE1/4, NE1/4NW1/4 as shown on sheet 15 of 36 of the as-built survey (containing approximately 2.80 acres); Sec. 16, Lot 1, that portion within State Selection Community Grant Application AA-56321 occupied by 1,750 feet of the transmission line and 1,750 feet of access road as shown on sheets 14 and 15 of 36 of the as-built survey (containing approximately 4.20 acres); Sec. 17, W1/2W1/2SW1/4, E1/2SW1/4SW1/4 (60.0 acres); Sec. 18, Lot 9 (3.09 acres); Lot 11 (36.47 acres); Lot 18 (19.46 acres); SE1/4SW1/4, NE1/4SE1/4, S1/2SE1/4 (160.0 acres); Sec. 19, Lot 3.(7.70 acres); W1/2NW1/4NE1/4NE1/4NE1/4 (1.25 acres); N1/2NW1/4NE1/4NE1/4(5.0 acres); N1/2S1/2NW1/4NE1/4NE1/4 (2.5 acres); 1 E1/2NE1/4NE1/4NW1/4NE1/4 (1.25 acres); N1/2NW1/4NW1/4NE1/4 (5.0 acres); Sec. 29. E1/2NW1/4 (80.0 acres); E1/2E1/2SW1/4. (40.0 acres); E1/2W1/2E1/2SW1/4 (20.0 acres); W1/2W1/2W1/2SE1/4(20.0 acres); Sec. 32, W1/2,W1/2NE1/4 (40.0 acres); E1/2E1/2NW1/4 (40.0 acres); W1/2SE1/4(80.0 acres). Containing approximately 628.72 acres. T. 13 N., R. 2 W., (partially surveyed) Sec. 4, NW1/4NW1/4NW1/4, those portions occupied by 350 feet of transmission line and 100 feet of access road as shown on sheet 5 of 36 of the as-built survey (containing approximately 0.67 acre); Sec. 5, those portions occupied by 6,850 feet of transmission line and 6,100 feet of access road as shown on sheet 5 of 36 of the as-built survey (containing approximately 15.99 acres); Sec. 7, those portions occupied by 6,300 feet of transmission line and 500 feet of access road as shown on sheets 4 and 5 of 36 of the as-built survey (containing approximately 11.22 acres); Sec. 8, NW1/4NW1/4NW1/4, those portions occupied by 850 feet of transmission line and 200 feet of access road as shown on sheet 5 of 36 of the as-built survey (containing approximately 1.60 acres); Sec. 18, those portions occupied by 5,300 feet of transmission line and 750 feet of access road as shown on sheet 4 of 36 of the as-built survey (containing approximately 9.65 acres); Sec. 19 (unsurveyed section), those portions occupied by 5,700 feet of transmission line and 1,500 feet of access road as shown on sheet 4 of 36 of the as-built survey (containing approximately 10.59 acres); Sec. 30 (unsurveyed section), N1/2N1/2N1/2NW1/4, those portions occupied by 300 feet of transmission line as shown on sheet 4 of 36 of the as-built survey, the width is 37.5 feet as the transmission line runs along the section line (containing approximately 0.26 acres). The area described contains approximately 49.98 acres. T. 14 N., R. 2 W., (partially surveyed) Sec. 2, those portions occupied by 4,950 feet of transmission line and 4,350 feet of access road as shown on sheets 7 and 8 of 36 of the as-built survey (containing approximately 11.52 acres); 2 Sec. 10, those portions occupied by 3,850 feet of transmission line and 2,375 feet of access road as shown on sheet 7 of 36 of the as-built survey (containing approximately 8.26 acres); Sec. 11. those portions occupied by 1,800 feet of transmission line and 100 feet of access road as shown on sheet 7 of 36 of the as-built survey (containing approximately 3.17 acres); Sec. 15, those portions occupied by 5,650 feet of transmission line and 1,100 feet of access road as shown on sheets 6 and 7 of 36 of the as-built survey (containing approximately 10.49 acres); Sec. 21, those portions occupied by 2,200 feet of transmission line and 1,000, feet of access road as shown on sheet 6 of 36 of the as-built survey (containing approximately 4.48 acres); Sec. 22,) those portions occupied by 3,550 feet of transmission line and 3,100 feet of access road as shown on sheet 6 of 36 of the as-built survey (containing approximately 8.24 acres); Sec. 28, those portions occupied by 5,800 feet of transmission line and 4,150 feet of access roads as shown on sheet 6 of 36 of the as-built survey (containing approximately 12.85 acres). Sec. 33, those portions occupied by 6,700 feet of transmission line and 6,200 feet of access road as shown on sheets 5 and 6 of 36 of the as-built survey (containing approximately 15.81 acres. The area described contains approximately 74.82 acres. For all townships the total is approximately 983.58 acres. 3 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF CONTRACT NO. 85-80AP10022.000 This ASSIGNMENT AND TRANSFER OF CONTRACT NO. 85-80AP10022.000 is made this 2nd day of October, 1997, between the UNITED STATES OF )AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801- 8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17,, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns and transfers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty and obligation of the UNITED STATES, in connection with the CONTRACT NO. 85- 80AP10022.000. The EKLUTNA PURCHASERS hereby accept all right, interest, duty and obligation associated with CONTRACT No. 85-80AP10022.000. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF CONTRACT NO. 85-80AP10022.000 as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager The undersigned hereby concur in the ASSIGNMENT AND TRANSFER OF CONTRACT NO. 85-AP10022.000: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF RIGHT-OF-WAY LICENSES This ASSIGNMENT AND TRANSFER OF LICENSES is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns and transfers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty and obligation of the UNITED STATES, in connection with the Right-of-Way Licenses listed in Exhibit A, attached hereto and made a part hereof. The EKLUTNA PURCHASERS hereby accept all right, interest, duty and obligation associated with the Right-of-Way Licenses referred to in Exhibit A. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF RIGHT-OF-WAY LICENSES as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney EXHIBIT A LICENSE NUMBER NAME PURPOSE EK-ROW-95-01 MOA/AWWU Water main crossing APA Transmission line near Structure No. 30/1 EK-ROW-95-02 Enstar Gas line within APA ROW along Northern Lights Blvd. EK-ROW-95-03 MOA/ATU Telephone lines within APA ROW Along Northern Lights Blvd. EK-ROW-96-01 City of Palmer Pedestrian walkway, Palmer Substation EK-ROW-96-02 MOA/AWWU Eklutna Lake Intake and water Project transmission line within APA ROW EK-ROW-96-03 MOA/AWWU Sewer Line within APA ROW along Northern Lights Blvd. EK-ROW-96-04 MOA/AWWU Water system within APA ROW along Northern Lights Blvd. EK-ROW-96-06 Prime Cable Telecommunications lines within APA ROW Northern Lights Blvd. Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF "COOPERATIVE LAND MANAGEMENT AGREEMENT BETWEEN THE UNITED STATES OF AMERICA THROUGH THE ALASKA POWER ADMINISTRATION AND THE BUREAU OF LAND MANAGEMENT AND THE STATE OF ALASKA THROUGH THE ALASKA DIVISION OF PARKS AND OUTDOOR RECREATION FOR THE MANAGEMENT OF CERTAIN LANDS IN THE UPPER EKLUTNA VALLEY" This ASSIGNMENT AND TRANSFER OF "COOPERATIVE LAND MANAGEMENT AGREEMENT BETWEEN THE UNITED STATES OF AMERICA THROUGH THE ALASKA POWER ADMINISTRATION AND THE BUREAU OF LAND MANAGEMENT AND THE STATE OF ALASKA THROUGH THE ALASKA DIVISION OF PARKS AND OUTDOOR RECREATION FOR THE MANAGEMENT OF CERTAIN LANDS IN THE UPPER EKLUTNA VALLEY" is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., And the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns and transfers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty, and obligation of the UNITED STATES, Alaska Power Administration, in connection with the "Cooperative Land Management Agreement Between The United States of America through The Alaska Power Administration and The Bureau of Land Management and The State of Alaska through The Alaska Division of Parks and Outdoor Recreation for The Management of Certain Lands in the Upper Eklutna Valley." The EKLUTNA PURCHASERS hereby accept all right, interest, duty and obligation associated with the "COOPERATIVE LAND MANAGEMENT AGREEMENT BETWEEN THE UNITED STATES OF AMERICA THROUGH THE ALASKA POWER ADMINISTRATION AND THE BUREAU OF LAND MANAGEMENT AND THE STATE OF ALASKA THROUGH THE ALASKA DIVISION OF PARKS AND OUTDOOR RECREATION FOR THE MANAGEMENT OF CERTAIN LANDS IN THE UPPER EKLUTNA VALLEY". IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF "COOPERATIVE LAND MANAGEMENT AGREEMENT BETWEEN THE UNITED STATES OF AMERICA THROUGH THE ALASKA POWER ADMINISTRATION AND THE BUREAU OF LAND MANAGEMENT AND THE STATE OF ALASKA THROUGH THE ALASKA DIVISION OF PARKS AND OUTDOOR RECREATION FOR THE MANAGEMENT OF CERTAIN LANDS IN THE UPPER EKLUTNA VALLEY" as of the day and year first written above. Acceptance: United States of America Municipality of Anch Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager The undersigned hereby concur in the ASSIGNMENT AND TRANSFER OF "COOPERATIVE LAND MANAGEMENT AGREEMENT BETWEEN THE UNITED STATES OF AMERICA THROUGH THE ALASKA POWER ADMINISTRATION AND THE BUREAU OF LAND MANAGEMENT AND THE STATE OF ALASKA THROUGH THE ALASKA DIVISION OF PARKS AND OUTDOOR RECREATION FOR THE MANAGEMENT Or CERTAIN LANDS IN THE UPPER EKLUTNA VALLEY": The Bureau of Land Management U.S. Department of Interior /s/ Nick Douglas Name: District Manager Title: State of Alaska Division of Parks and Outdoor Recreation Alaska Department of Natural Resources /s/ Jim Statton Name Director Title: Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED This ASSIGNMENT AND TRANSFER OF AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns and transfers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty and obligation of the UNITED STATES, in connection with the AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED. The EKLUTNA PURCHASERS hereby accept all right, interest, duty and obligation associated with AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager The undersigned hereby concur in the ASSIGNMENT AND TRANSFER OF AGREEMENT FOR PUBLIC WATER SUPPLY AND ENERGY GENERATION FROM EKLUTNA LAKE, ALASKA, AS SUPPLEMENTED: MUNICIPALITY OF ANCHORAGE /s/ George J. Vakalis for Larry D. Crawford Municipal Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney Duplicate Original QUITCLAIM DEED Federal Reserved Water Right Under the Eklutna Project Act of 1950, 64 Stat. 382, As Amended, Including State of Alaska Water Rights Certificate of Appropriation (Amended) ADL 44944 This QUITCLAIM DEED is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as the UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby RELEASES and QUITCLAIMS to the EKLUTNA PURCHASERS, their successors or assigns, as tenants in common according to their fractional interests as more particularly set forth herein, all right, title, and interest of the UNITED STATES in and to that certain federal reserved water right created by the Eklutna Project Act of 1950, 64 Stat. 382, as amended, and including State of Alaska Water Rights Certificate of Appropriation (Amended) ADL 44944, recorded May 9, 1995, in the official records of Anchorage Recording District, Third Judicial District, State of Alaska, in Miscellaneous Book 2784, pages 690-692. The right, title and interest of the UNITED STATES hereby released and quitclaimed to the EKLUTNA PURCHASERS vests in the EKLUTNA PURCHASERS as tenants in common to the full extent of the undivided interests set forth below: Municipality of Anchorage, d/b/a Municipal Light and Power 16/30 Chugach Electric Association, Inc. 9/30 Matanuska Electric Association, Inc. 5/30 IN WITNESS THEREOF, the UNITED STATES has executed this QUITCLAIM DEED as of the day and year first written above. UNITED STATES OF AMERICA Department of Energy Alaska Power Administration /s/ Rodney L. Adelman Rodney L. Adelman Administrator ACKNOWLEDGMENT STATE OF ALASKA Third Judicial District The foregoing instrument was acknowledged before me this 2nd day of October, 1997, by Rodney L. Adelman, Administrator, Alaska Power Administration, United States Department of Energy. Witness my hand and official seal. /s/ Lee Anne Mackay Notary Public (Seal) My Commission expires: 5/25/2000 Duplicate Original UNITED STATES OF AMERICA DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION ASSIGNMENT AND TRANSFER OF THE JUNE 3, 1957, PERMIT LETTER; AND REVOCABLE PERMIT OF USE DATED APRIL 9, 1958; REGARDING THE KNIK RIVER BRIDGE This ASSIGNMENT AND TRANSFER is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat.. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer,.AK 99645. WITNESSETH, that the UNITED STATES, for mutual benefits and other good and valuable consideration, hereby assigns and transfers to the EKLUTNA PURCHASERS, their successors or assigns, all right, interest, duty, obligation and liability of the UNITED STATES, in connection with the June 3, 1957, permit letter and April 9, 1958 Revocable Permit of Use. The EKLUTNA PURCHASERS hereby accept all right, interest, duty, obligation and liability associated with the June 3, 1957, permit letter and April 9, 1958 Revocable Permit of Use. IN WITNESS THEREOF, the parties have executed this ASSIGNMENT AND TRANSFER OF THE JUNE 3, 1957, PERMIT LETTER; AND REVOCABLE PERMIT OF USE DATED APRIL 9, 1958; REGARDING THE KNIK RIVER BRIDGE as of the day and year first written above. Acceptance: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Acceptance: Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Acceptance: Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager The undersigned hereby concur in the ASSIGNMENT AND TRANSFER OF THE JUNE 3, 1957, PERMIT LETTER; AND REVOCABLE PERMIT OF USE DATED APRIL 9, 1958; REGARDING THE KNIK RIVER BRIDGE State of Alaska Department of Transportation and Public Facilities /s/ William R Strickler William R. Strickler Chief, Traffic Safety and Utilities Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney Duplicate Original UNITED STATES DEPARTMENT OF ENERGY ALASKA POWER ADMINISTRATION EKLUTNA PROJECT, ALASKA ASSIGNMENT OF CONTRACT DE-SC85-95AP10042 This Contract ASSIGNMENT is made this 2nd day of October, 1997, between the UNITED STATES OF AMERICA, acting by and through the Department of Energy, Alaska Power Administration, whose address is 2770 Sherwood Lane, Juneau, AK 99801-8545, represented by the officer executing this document, pursuant to the Reclamation Act of June 17, 1902, 32 Stat. 388, as amended, the Eklutna Project Act of 1950, 64 Stat. 382, as amended, the Energy Organization Act of August 4, 1977, 91 Stat. 565, as amended, and the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, as amended, herein referred to as UNITED STATES, and the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc., collectively referred to herein as EKLUTNA PURCHASERS, whose address is, Eklutna Project, HC 04, Box 7785, Palmer, AK 99645. I. Background The United States owns, operates and maintains the Eklutna Project including facilities for the generation and transmission of electric power and energy; Pursuant to the Alaska Power Administration Asset Sale and Termination Act, 109 Stat. 557, the UNITED STATES intends to transfer all of its interest in the Eklutna Project to the Eklutna Purchasers; The United States entered into Contract No. DE-SC85-95AP10042 with the Municipality of Anchorage, doing business as Municipal Light and Power, the Chugach Electric Association, Inc., and the Matanuska Electric Association, Inc; The United States desires to assign its rights, duties and all interests or obligations in Contract No. DE-SC85-95AP10042 to the Eklutna Purchasers; The Eklutna Purchasers are willing to accept the assignment of the United States' rights, duties and all interests or obligations in Contract No. DE-SC85-95AP10042; In consideration of the mutual benifits, the parties agree as follows: II. Assignment of Contract No. DE-SC85-95AP10042 This Contract Assignment shall become effective on the date of execution. The United States hereby assigns its rights, duties and all other interests or obligations in Contract No. DE-SC85-95AP10042 to the Eklutna Purchasers. The Eklutna Purchasers, hereby accept and assume the United States rights, duties and all other interest or obligations in Contract No. DE-SC85-95AP10042. The Eklutna Purchasers agree that they shall be subject to all of the provisions and condition of Contract No. DE- SC85-95AP10042. The Municipality of Anchorage, doing business as Municipal Light and Power, hereby consents to the assignment of the United States' rights, duties and all other interest or obligations in Contract No. DE-SC85- 95AP10042 to the Eklutna Purchasers. The Chugach Electric Association, Inc., hereby consents to the assignment of the United States' rights, duties and all other interest or obligations in Contract No. DE-SC85-95AP10042 to the Eklutna Purchasers. The Matanuska Electric Association, Inc., hereby consents to the assignment of the United States' rights, duties and all other interests or obligations in Contract No. DE-SC85-95AP10042 to the Eklutna Purchasers. The Municipality of Anchorage, doing business as Municipal Light and Power, hereby releases the United States of its duties and all other obligations in Contract No. DE-SC85-95AP10042. The Chugach Electric Association, Inc., hereby releases the United States of its duties and all other obligations in Contract No. DE- SC85-95AP10042. The Matanuska Electric Association, Inc., hereby releases the United States of its duties and all other obligations in Contract No. DE- SC85-95AP10042. III. Agreement All parties agree that this assignment shall become effective on the date of execution. PARTIES TO THE ORIGINAL CONTRACT: United States of America Municipality of Anchorage Department of Energy dba Municipal Light and Power Alaska Power Administration /s/ George J. Vakalis for /s/ Rodney L. Adelman Larry D. Crawford Rodney L. Adelman Municipal Manager Administrator Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager EKLUTNA PURCHASERS BY: Municipality of Anchorage dba Municipal Light and Power /s/ George J. Vakalis for Larry D. Crawford Municipal Manager Chugach Electric Association, Inc. /s/ Eugene N. Bjornstad Eugene N. Bjornstad General Manager Matanuska Electric Association, Inc. /s/ Wayne D. Carmony Wayne D. Carmony General Manager Recommended: Anchorage Municipal Light & Power /s/ Hank Nikkels Hank Nikkels Acting General Manager Recommended: Municipality of Anchorage /s/ George Vakalis George J. Vakalis Operations Manager Approved as to Form: Municipality of Anchorage /s/ Mary K. Hughes Mary K. Hughes Municipal Attorney EX-10.65 4 $50 MILLION LINE OF CREDIT WITH NRUCFC National Rural Utilities Cooperative Finance Corporation Revolving Line of Credit Agreement ("Agreement") Name of Borrower: ___Chugach Electric Association, Inc.________________________ Address:__5601 Minnesota Drive; Anchorage, Alaska 99516_______________________ National Rural Utilities Cooperative Finance Corporation ("CFC"), a District of Columbia corporation, has approved Borrower for a revolving line of credit loan in an amount not to exceed___Fifty Million____________________________________Dollars ($50,000,000) (hereinafter referred to as the "CFC Commitment"). Borrower hereby agrees that the terms and conditions herein, plus any additional terms and conditions agreed to in writing by the parties, shall constitute a valid and binding agreement between Borrower and CFC. In consideration of their mutual promises hereunder and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CFC and Borrower agree to the following terms and conditions: 1. Revolving Credit and Term. CFC agrees to advance funds to the Borrower pursuant to the terms and conditions hereof (each such advance of funds is referred to herein as an "Advance"), provided, however, that the amount at any time outstanding under this line of credit shall not exceed the CFC Commitment. The Borrower may borrow, repay and reborrow funds at any time or from time to time for a period up to sixty_________ months from the effective date hereof. 2. Requisitions. Requests for Advances shall be in such written form as CFC may reasonably require from time to time. 3. Interest Rate and Payment. The Borrower unconditionally promises and agrees to pay, as and when due, interest on all amounts advanced hereunder from the date of each Advance and to repay all amounts advanced hereunder with interest on the date this Agreement terminates as provided herein. Interest shall be due and payable in accordance with CFC's regular billing cycles as may be in effect from time to time. CFC shall send a payment notice to the Borrower at least five days prior to the due date of any interest payment. All amounts shall be payable at CFC's main office at Woodland Park, 2201 Cooperative Way, Herndon, Virginia 20171-3025 or at such other location as designated by CFC from time to time. The interest rate on all Advances will be equal to the total rate per annum as may be fixed by CFC from time to time, which shall not exceed the Prevailing Bank Prime Rate (as defined herein), plus one percent per annum. Interest will be computed on the basis of a 365 day year for the actual number of days that any Advance is outstanding. The effective date of an interest rate adjustment will be determined and published from time to time by CFC, provided that no such adjustment may be effective on a date other than the first or sixteenth day of any month, and any such adjustment shall remain in effect until any subsequent change in the interest rate occurs, and further provided that the failure of CFC to publish or otherwise announce the interest rate adjustment on or before the effective date of such adjustment shall not delay or otherwise alter such effective date. The "Prevailing Bank Prime Rate" is that bank prime rate published in the "Money Rates" column of the eastern edition of The Wall Street Journal on the publication day immediately preceding the day on which an adjustment in the interest rate hereof shall become effective. If The Wall Street Journal shall cease to be published, then the Prevailing Bank Prime Rate shall be determined by CFC by reference to another publication reporting bank prime rates in a similar manner. 4. CFC Accounts. CFC shall maintain in accordance with its usual practices an account or accounts evidencing the indebtedness of the Borrower resulting from each Advance and the amounts of principal and interest payable and paid hereunder. In any legal action or proceeding in respect of this Agreement, the entries made in such account or accounts (whether stored on computer memory, microfilm, payment notices or otherwise) shall be presumptive evidence (absent manifest error) of the existence and amounts of the Borrower's transactions therein recorded. 5. Corporate and Regulatory Approvals. Borrower represents and warrants that it has obtained any and all necessary corporate and regulatory approvals for Borrower to execute, deliver and perform its obligations under this Agreement. 6. Reports. During the term of this Agreement, Borrower agrees (a) to provide CFC, within 120 days of the end of Borrower's fiscal year, its annual financial statements, prepared in accordance with generally accepted accounting principles ("GAAP") and audited by an independent certified public accountant, or otherwise in form and substance satisfactory to CFC, and (b) to provide CFC with any other reports or information which CFC may from time to time reasonably request. 7. Fees. If any amount outstanding and due hereunder shall not be paid when due, Borrower agrees to pay on demand CFC's reasonable costs of collection or enforcement of this Agreement, or preparation therefor, including reasonable fees of counsel. If payment of any principal and/or interest due under the terms of this Agreement is not received at CFC's office in Herndon, Virginia, or such other location designated by CFC within 5 business days after the due date thereof, then Borrower shall pay to CFC, on demand, and in addition to all other amounts due under the terms of this Agreement, any late-payment and additional interest charges as may then be in effect pursuant to CFC's then current policies of general application without setoff or counterclaim. For purposes of this Agreement, a "business day" means a day that both CFC and the financial institution it employs for funds remittance are open for business. 8. Limitation on Advances. While an Advance is outstanding, CFC reserves the right to limit further Advances if the sum of (a) all Advances outstanding, (b) the amount of any further Advance requested, and (c) the total amount of Borrower's other unsecured outstanding debt, would exceed the CFC Commitment. 9. Reduce Balance to Zero. In the event that the term of this Agreement is greater than twelve months, then the Borrower agrees that for each 12-month period while this Agreement is in effect, Borrower shall, for a period of at least five consecutive business days, reduce to zero all amounts outstanding hereunder. Borrower shall make the first balance reduction within 360 days of the first Advance hereunder. Each subsequent balance reduction shall be made within 360 days of the last day of such five-day period. 10. Credit Support. With CFC's prior written approval, this Agreement may be used as credit support for other financings. 11. Notices, Acceleration of Debt and Waivers. While an Advance is outstanding, Borrower agrees to notify CFC in writing of (a) any delinquency or default on any of its financial obligations in an amount in excess of $500,000.00, (b) any material adverse change in its financial or business condition, and (c) if any representation or warranty made in this Agreement is no longer true in any material respect. If any delinquency, default, or any other event as a result of which any holder of indebtedness in an amount in excess of $500,000.00 may declare the same due and payable shall occur and continue uncorrected for more than any applicable grace period, or any representation or warranty herein shall no longer be true in any material respect, or Borrower shall fail to perform or to comply with any material term of this Agreement, or if the financial condition of Borrower shall have changed to the extent that such change, in the reasonable judgment of CFC, materially increases CFC's risk of repayment hereunder, then CFC may declare at any time all outstanding principal, interest and other amounts due hereunder immediately due and payable in full with accrued interest, without presentment or demand, and may withhold Advances. The Borrower waives the defense of usury and all rights to setoff, counterclaim, deduction or recoupment. 12. Survival of Representations and Warranties and Payment Obligations. Borrower agrees that its obligation to repay principal, interest and all other amounts due hereunder, and the representations and warranties made herein, shall survive termination of this Agreement. Borrower further agrees that such repayment obligations shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower is rescinded, set aside or must be otherwise restored, whether as a result of any proceeding in bankruptcy or reorganization or otherwise. 13. Representations and Warranties. Borrower represents and warrants that as of the date of its application for this line of credit, and on the date of each Advance hereunder: a) the Borrower is not in default of any of its financial obligations in an amount in excess of $500,000.00; b) there has been no material adverse change in the Borrower's business or financial condition from that set forth in its most recent audited financial statements; c) no litigation is pending or, to the best of Borrower's knowledge, threatened against the Borrower as to which there is a reasonable possibility of a determination adverse to Borrower and which, if adversely determined, would have a material adverse effect on the Borrower's ability to perform under this Agreement; d) the information contained in Borrower's audited financial statements, its other financial reports and information otherwise submitted in connection with this Agreement is complete and accurate, and said financial statements and financial reports fairly represent the financial condition of the Borrower as of the dates reflected thereon; e) the execution, delivery and performance of this Agreement has been duly authorized by the Borrower, which authorization has not been rescinded or modified; and f) all Advances hereunder will be used only for proper corporate purposes 14. Conditions of Lending. As a condition to CFC making Advances hereunder, each of the following conditions shall be satisfied at the time of each Advance: a) CFC shall have received the Borrower's most recent annual financial statements, prepared in accordance with GAAP and audited by an independent certified public accountant, or otherwise in form and substance satisfactory to CFC; b) all representations and warranties set forth herein shall be true and correct; and c) the Borrower shall have obtained any and all necessary corporate, regulatory and governmental approvals for the Borrower to execute, deliver and perform its obligations under this Agreement. 15. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THE PERFORMANCE AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA. (b) BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES COURTS LOCATED IN VIRGINIA AND OF ANY STATE COURT SO LOCATED FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE ESTABLISHING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 16. Severability. If any term, provision or condition, or any part thereof, of this Agreement shall for any reason be found or held invalid or unenforceable by any court or governmental agency of competent jurisdiction, such invalidity or unenforceability shall not affect the remainder of such term, provision or condition nor any other term, provision or condition, and this Agreement shall survive and be construed as if such invalid or unenforceable term, provision or condition had not been contained herein. 17. Setoff. CFC is hereby authorized at any time and from time to time without prior notice to the Borrower to exercise rights of setoff or recoupment and apply any and all amounts held, or hereafter held, by CFC or owed to the Borrower or for the credit or account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing hereunder. CFC agrees to notify the Borrower promptly after any such setoff or recoupment and the application thereof, provided that the failure to give such notice shall not affect the validity of such setoff, recoupment or application. The rights of CFC under this section are in addition to any other rights and remedies (including other rights of setoff or recoupment) which CFC may have. 18. Additional Terms and Conditions. Additional terms and conditions as set forth herein or attached hereto are an integral part of this Agreement. 19. Termination and Cancellation of Existing Agreement. Borrower agrees that its existing line(s) of credit No(s). _09-60-008-R-5999________________________with CFC, if any, and any agreement(s) relating thereto shall be terminated and any outstanding principal, interest and other amounts outstanding thereunder shall be transferred to the line of credit established pursuant to this Agreement and deemed an Advance hereunder. 20. Miscellaneous. (a) This Agreement contains the entire agreement of the parties hereto with respect to the matters covered and the transactions contemplated hereby, and no other agreement, statement or promise made in connection with this line of credit by any party hereto, or by any employee, officer, agent or attorney of any party hereto which is not contained herein shall be valid and binding. (b) Any amendment to this Agreement must be in writing signed by both parties. (c) No failure or delay by CFC in exercising any right or remedy hereunder shall operate as a waiver or preclude the future exercise thereof or of any other right or remedy. (d) If any payment is due from Borrower on a day which CFC is not open for business, then such payment shall be made on the next succeeding day on which CFC is open for business. 21. Effective Date. This Agreement is effective as of __________________________. (To be provided by CFC) 22. Additional Terms and Conditions. Name of Borrower:_______________________________________________________ Signed By:_/s/ Eugene N. Bjornstad_______________________________________ Title:_____________________________________________ NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION By: _/s/ Robert D. Stephens__________________ Loan Number: _09-60-008-R-5100_ Assistant Secretary-Treasurer EX-27 5 FDS -- 12/31/97 10-K CHUGACH ELECTRIC ASSOCIATION
5 12-MOS DEC-31-1997 JAN-1-1997 DEC-31-1997 5,589,307 0 24,367,167 (368,029) 15,619,085 46,223,019 650,030,198 (232,136,950) 485,567,299 34,461,148 312,006,501 0 0 0 109,119,697 485,567,299 $143,947,730 $143,947,730 0 113,070,990 0 0 25,084,361 7,554,397 0 7,554,397 0 0 0 7,554,397 0 0
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